How can a business handle its financial operations in a recession?
A recession is coming!
We can say that because much like seasons that come and go, an economic recession is a natural progression of an economic cycle.
It’s impossible though, to predict when a recession will happen or what will cause it. But there are some common symptoms of a recessed economy that can impact businesses negatively.
When that recession occurs, what can a business` finance team do in order to prepare and ease the business for it.
Pay attention to what the Data?says
A finance team relies on financial data to make sound business decisions. This is even more important during a recession.?
The finance team should be proactive and be ready to devise an action plan for any potential slowing of sales and profits.
The finance team should use the data to manage risks to the business that are within their control and in order to maintain a flexible cost structure that can be adjusted to navigate a recession.
Have adequate Liquidity
Take a close look at the organisations spending habits and create a plan to increase how much the organisation can save.
Liquidity will be important during this economic downturn so focus on maintaining adequate liquidity to sustain your business through it.
Simply put, liquid assets provide you with greater flexibility.
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Quick access to cash gives you the flexibility to pay bills and debt even if there’s a disruption in your income stream.
Leverage government relief incentives
Most governments globally, often provides financial relief and stimuli to industries during economic recessions in order to reduce the impact of a recession on the country.?
These financial reliefs can be in form of tax reliefs or government grants in certain sectors.
A finance team should leverage these as much as possible in order to reduce the impact of low sales and to ensure that the company can survive during the downturn period.
Invest in the?Future
Just as it came, the recession will also end, and the finance team can also look at the downturn as an opportunity.
A downturn is described as more of a ‘buyer’s market’.
This means that companies have a chance to make investments at low initial costs.
As you improve your company’s finances and increase your cash reserves, investing more in asset will yield benefits in the long term.
Being geared up once a recession happens will help your business survive the worst that is yet to come. Call in experts to do this for you if possible.