There is no question that we're on the cusp of a global recession that will affect businesses of all sizes.
The important thing for business owners to remember is that there are steps they can take to protect their businesses and ensure that they survive these tough times.
In this blog post, we will provide tips and tools to help you keep your business afloat during these difficult times.
We will also discuss the importance of credit control and accounts receivable, two key areas that are essential for any business trying to stay afloat during a recession.
What does a recession actually mean?
A recession is a general slowdown in economic activity. This can be caused by a number of factors, such as an increase in interest rates, a decrease in consumer confidence, or an increase in the cost of raw materials.
When consumers spend less money, businesses make less money. This can lead to layoffs, pay cuts, and even business closures.
Recessions can last for months or even years, and they often have a ripple effect on other areas of the economy. For example, during a recession, businesses may cut back on advertising and marketing budgets. This can lead to job losses in the advertising and marketing industry.
A good example is the 2008 recession. The housing market crash was the trigger, but it quickly led to job losses in other industries, such as construction, banking, and retail.
In turn, this led to even more job losses as consumers had less money to spend. The recession eventually spread to other countries, causing a global economic downturn.
Recessions are often caused by a combination of factors. For example, the current pandemic has led to a decrease in consumer spending and an increase in unemployment.
This has put immense pressure on businesses, leading to widespread layoffs and closures.
So how does all this affect you and your business?
First, it’s important to understand that a recession is not necessarily a bad thing. In fact, recessions can actually be good for businesses. They force companies to become leaner and more efficient.
And when the economy eventually recovers, businesses that have survived the downturn are often in a stronger position than their competitors.
The good news is that recessions don't last forever. Once the underlying causes are addressed, the economy will eventually start to recover. In the meantime, it's important to do what we can to weather the storm.
Why liquidity is so important during a recession
One of the most important things businesses can do during a recession is to maintain liquidity. This means having enough cash on hand to meet short-term obligations like payroll and rent.
It can be tempting to cut back on expenses when revenue is down, but doing so can put a company in a precarious position. If you don't have enough cash to meet your obligations, you may be forced to take out loans or sell assets at fire-sale prices.
Maintaining liquidity gives you the flexibility to weather the storm and take advantage of opportunities that arise during a recession.
Of course, no one wants to go through a recession, but you're not powerless. There are things you can do to weather the storm and come out ahead.
What can businesses do to ride out the recession?
There are a number of things businesses can do to weather a recession, including:
Maintain liquidity
As we mentioned above, maintaining liquidity is crucial. You need to have enough cash on hand to meet your obligations, even if revenue takes a hit. Having a good cash flow management system in place will help you make the most of your available resources.
There are a number of ways to improve your cash flow, including:
- Reviewing your expenses and cutting back where possible
- Reducing or delaying discretionary spending
- Negotiating with creditors to extend payment terms
- Offering discounts for early payments
- Invoicing promptly
Don't stop marketing
It may be tempting to cut back on marketing when cash is tight, but this can be a mistake. Marketing is an investment that can help you bring in more business and grow your revenue. If you have to cut back somewhere, look at other areas of your budget first.
Invest in marketing and sales initiatives that will help you weather the downturn and emerge stronger when the economy recovers.
Now is the time to review your marketing strategy and budget. Are there areas where you can cut back? Are there more effective ways to reach your target market?
Be prepared for the worst
No one likes to think about the possibility of failure, but it's important to have a plan in place in case your business does run into trouble. This could include things like:
- Cutting expenses
- Downsizing your operation
- Selling assets
By being prepared for the worst, you can help ensure that your business is able to weather any storm.
Keep communication channels open
When times are tough, it's important to keep communication channels open with your employees, customers, and suppliers. This way, you can stay up-to-date on what's happening and make sure that everyone is on the same page.
Open communication will also help to build trust and keep your relationships strong.
Cut costs
During a recession, it's important to closely examine your expenses and find ways to cut costs where possible.
This may mean reducing or eliminating discretionary spendings, such as advertising or travel. You may also need to make tough decisions about staff, such as reducing hours or implementing layoffs.
However, it is important that you cut costs, not quality in a recession. If you cut too deeply, it will be difficult to recover when the economy improves.
Increase revenue
In a recession, it is important to focus on ways to increase revenue. This may mean looking for new markets or finding ways to sell more to your existing customer base.
It may also mean diversifying your product offerings or expanding into new markets. It's also important to focus on customer retention and acquisition during this time.
Reduce debt
If you are carrying a lot of debt, now is the time to focus on reducing it. This will help you weather the storm and be in a better position when the economy improves.
There are a number of ways to reduce debt, such as negotiating with creditors, consolidating loans, and selling assets.
Keep a close eye on your competition
The most important thing is to keep a close eye on your competition so you can be ready to take advantage of any opportunities that come up. This may mean offering discounts or promotions, or investing in marketing and advertising.
While recessions are difficult times for businesses, they also present opportunities. By being prepared and taking advantage of these opportunities, you can come out of the recession stronger than ever.
Be prepared to make adjustments to your business model
In order to survive a recession, you may need to make some adjustments to your business model. This could include anything from reducing costs to changing your product offerings.
The most important thing is to be prepared and willing to make changes if necessary. By doing so, you’ll increase your chances of weathering the storm and coming out on top.
In today’s ever-changing business landscape, it’s more important than ever to be flexible and adaptable. If you’re stuck in a traditional mindset, you may find yourself at a disadvantage when disruptive companies enter your industry.
To stay ahead of the curve, it’s important to be innovating and thinking outside the box constantly. This could mean anything from changing your marketing strategy to altering your product offerings.
The most important thing is to be prepared and willing to make changes if necessary. By doing so, you’ll increase your chances of weathering the storm and coming out on top.
Why credit control is so important during a recession
In a recession, businesses have to tighten their belts and become more frugal. This is often easier said than done, as many companies are forced to make difficult decisions when it comes to spending.
One of the most important areas to focus on during a recession is credit control. By carefully managing your finances and keeping tabs on your spending, you can avoid getting into debt or defaulting on payments.
This can be a challenge, but it’s crucial to maintain a good financial standing during tough economic times. By doing so, you’ll increase your chances of weathering the storm and coming out on top.
Credit control is essential for businesses in all industries, but it becomes even more important during a recession.
When businesses are struggling, they need to be extra careful with their spending. This means looking at all areas of expenditure and making sure that only the essential costs are incurred.
So what are some tips for credit control during a recession? Let’s take a look:
- Review your expenses regularly and cut out any non-essential costs - This is a good tip for credit control in general, but it becomes even more important during a recession. Regularly review your expenses and see where you can make cuts. This could involve anything from cancelling unused subscriptions to renegotiating contracts with suppliers.
- Negotiate better terms with suppliers - If your business is struggling to make ends meet, it’s worth reaching out to your suppliers and negotiating better terms. This could involve anything from extending payment terms to getting a discount on bulk orders.
- Offer discounts for early payment - If you’re owed money by customers, offer them a discount for early payment. This will help to improve your cash flow and could make the difference between survival and failure.
- Cut costs where possible - Take a close look at your business expenses and see where you can cut costs. This could involve anything from reducing advertising spend to renegotiating office leases.
- Chase up late payments swiftly and firmly - It’s important to chase up late payments as soon as possible. The longer you leave it, the less likely you are ever to see the money. Be firm but fair when chasing up late payments and consider using a debt collection agency if necessary.
- Review your pricing - If your prices are too low, you could be damaging your business in the long run. Review your pricing and make sure you’re making a profit on every sale.
- Make use of technology - Technology can help you to streamline your business and make it more efficient. Look for ways to use technology to automate tasks and reduce costs. Chaser's online payment software is a great way to automate your debtor chasing.
- Consider offering payment plans - If a customer is struggling to pay their debts, consider offering them a payment plan. This will help them to pay off their debt and avoid defaulting on their payments.
There are a number of things you can do to chase up late payments and ensure you get paid on time. By following these tips, you can reduce the amount of debt you have and improve your cash flow.
By following these tips, you can help your business to weather the storm during a recession. Credit control is not always easy, but it is essential for keeping your business afloat.
Weathering the storm
Recessions are tough on businesses, but by following some best practices for credit control, you can weather the storm. Reviewing expenses regularly and cutting costs where possible is a good place to start.
You should also chase up late payments swiftly and firmly. Using automation tools like Chaser can help make the process easier and take some of the burden off of your shoulders.
If you're struggling to chase up payments, or if you're worried about defaulting on your payments, Chaser can help. Our online payment software can automate your debtor chasing and help you to get paid on time, every time.
Why not try Chaser free for 14 days? Click here to sign up.
