Unfortunately, it seems like an economic downturn could be on the way. Some estimate that the chance of falling into a recession in the next 18 months is over 50%.
While it may seem like your business will have to suffer during an economic downturn, it’s not mandatory. There are ways to prevent business issues during a recession and help it continue to grow and thrive.
When in an economic downturn, it’s especially important to improve your business finances and to have a great budget. In this guide, we’ll list the top business budgeting tips you need to follow during an economic recession.
Track Business Data Closely
To handle your business budgeting well during an economic downturn, it’s important to know where your business currently stands financially. You should make use of business data on sales and financial statements to get a clear idea of your status. You should also forecast future activity and the impact that economic changes will have.
Use the data you have available to create a clear budget and account for all business expenses and operating costs. Continue keeping close track of your finances as time goes on.
Get Help From Professionals
Perhaps the best thing you can do to work out your budget and get your finances in order is to make use of bookkeeping and CFO services. Doing so can help you to plan your budget correctly.
Professional financial services can help to monitor your finances and also make sure that you’re forecasting your finances as well.
Working with professionals who are experienced in helping businesses with the financial side of things can be worthwhile. They can be especially helpful for helping your business stay in great shape during an economic downturn.
Improve Cash Flow
When budgeting and working to keep your finances stable during a recession, you need to focus on protecting and managing your cash flow. You should make sure that you’re keeping track of past due invoices and that you have plenty of cash available at all times.
You should use the money your business earns to build an emergency savings fund. Ideally, have about 3-6 months of expenses available at all times.
Know When to Seek New Funding
If you need to secure new funding, be sure to carefully consider when you do it.
It might be more challenging for your business to secure funding after an economic downturn. Investors may not be as brave, and on top of this, the financial picture of your business after a downturn may make it harder for your business to qualify for various types of financing.
Keep in mind that you may want to get financing in advance of when you need it to ensure that your business is prepared for future plans.
Eliminate Unnecessary Expenses
While it’s always important to keep track of your expenses and eliminate any that are unnecessary, it’s especially important during an economic downturn. Make sure that you look closely at every expense that your business has and rethink whether you truly need to be spending money on each one.
Cutting down on the external services you’re using and making use of more recycling and reuse are just a few of the ways that you can reduce your costs.
Change Supplier Relationships
One of the best ways to reduce your expenses is to renegotiate any deals you have with suppliers. You should think carefully about your business relationships. Consider how much you’re paying for any essentials that you need.
Chances are that if you’ve been with a supplier for a long time, you can renegotiate a better deal and get supplies more affordably. However, in some cases, it may be worth switching suppliers completely to make sure that you’re not paying too much money each month.
Reconsider New Purchases
You should also make sure that you think carefully about how you get access to equipment.
Buying new equipment is often not worth it, especially during a recession. It’s a good idea to consider the alternatives if you want to save money and minimize your economic burden.
Buying used or refurbished equipment can be a great solution that can help you save a considerable amount of money. You might also want to rent some equipment instead, at least until the economy picks up again.
Price Your Products and Services Correctly
When entering a recession, it’s a good time to reevaluate the pricing of your products and services. Ensure that they’re set appropriately. It might be worth raising your prices a bit during a recession so that your business will stay afloat.
However, you’ll want to be confident that you’ll get a reasonable number of sales after changing prices. Think carefully about how much additional income you’ll receive and avoid sabotaging customer relationships. Make sure that raising prices will actually lead to additional income.
Reconsider Your Staffing Needs
A big part of business expenses includes paying for staffing needs.
To prepare for an economic downturn, it’s important to think carefully about who you have on your team. Determine whether every role is completely necessary for your business. It may be best to let some staff members go, if necessary.
Fortunately, however, there are other ways to improve staffing as well and make the most of your budget. You might want to consider utilizing outsourcing or boosting your investment in an internship program. This can help your business get great work done in a more cost-effective way.
Improving Business Budgeting With These Tips
When facing an economic downturn, it’s more important than ever to get your business budgeting under control. You need to rethink your business expenses, protect your cash flow, and track data carefully so that your business will continue to grow during a recession.
Need professional bookkeeping, CFO, and tax services? Schedule your free consultation now to learn more about what we can do for you.
