With the worsening economic situation and Bank of England warnings that the UK will fall into recession this year, what does this mean for your business, and what can you do to limit the impact?
As we all know, Russia’s invasion of Ukraine, soaring energy prices and multiple consecutive lockdowns have all played a part in the economic crisis which could lead the country into a recession later this year. To help you navigate successfully through these turbulent times, we have put together a list of top tips to ensure you, and your business, are prepared for the challenges which a recession may bring.
Carefully monitor and manage your cashflow
Managing and closely monitoring the cash flow of your business should be a top priority when preparing for a recession. Examine your outgoings – are some expenses higher than they need to be? Are some of them ‘nice to haves’ rather than essential? Is your bookkeeping fit for purpose? Do you produce profit and cashflow forecasts and adjust them for potential varying scenarios? Cloud accounting software gives you a ‘live’ picture of your cashflow – if you’re still using spreadsheets, you may not spot potential issues until it’s too late.
- Move your clients to direct debit
Introduce an effective credit control process if you don’t have one already, this way you can reduce the amount of cash you have tied up in debtors. A strong majority of small businesses in the UK still rely on cheques and bank transfers to get paid – we would recommend switching to a direct debit tool to automatically take payments, reducing the chance of getting paid late and improving cash flow.
- Shorten payment terms
Consider reducing your payment terms to collect your money more quickly – helping you fill any cash flow gaps. You may be worried that this may upset your existing customers, however, if you explain your reasoning, they should be understanding.
- Keep close to your bank
Keep in communication with your bank. Manage their expectations carefully and keep them on side so that they will support you if you need to extend your borrowings.
Focus on your people
Staff retention should be at the forefront of your agenda when anticipating a recession. Your team are probably the essence of your company, and it will more important than ever to ensure morale is high. Although downsizing may be inevitable for some businesses during a recession, consider other options such as reducing hours and providing flexible options as an alternative, if possible. Focus on employee wellbeing and prioritising learning and development to help you be on the front foot as the economy recovers.
Ensure your customers remain a priority
Customer retention must remain a key focus during a recession. Invest in customer relationships, reward loyalty, communicate regularly and work hard to supply what your clients want in uncertain times. But be careful you don’t fall into the trap of heavy discounting.
Don’t cut back on marketing
In difficult times, when you may be trying to cut costs, reducing expenditure on marketing can seem like an easy fix. However, continuing to advertise during periods of disruption is important, as it will help to mitigate any drop in sales and ensure your brand awareness remains high.
Get in touch
If you would like to get in touch to discuss what you can do to recession-proof your business, contact your usual adviser or email email@example.com, and we will direct your query to the correct person.