No matter how much we may want to deny it, one thing is for certain: a recession is coming, and it will likely hit us hard. As a small business owner, you have much more to worry about than the average person. After all, you’ll need to protect both your personal life as well as business from the effects of the economy. How can you do so? Today, Virtual Ingenuity breaks down essential strategies to recession-proof your business today.
Effectively Manage Your Cash Flow
When a recession hits, keeping up with your cash flow can be challenging. Here are some tips to help you manage your cash flow more effectively during this time:
- Review your expenses and cut back where you can
- Make sure you are invoicing promptly and collecting payments as soon as possible
- Consider offering discounts to customers who pay early
- Stay on top of your accounts receivable and accounts payable
- Keep a close eye on your inventory levels
Structuring Your Business
Business structure is an essential element to consider when safeguarding against a recession. You may need to reevaluate how your business is currently structured to ensure you’re set up for success. For example, switching to an LLC may be a better option if you’re operating as a sole proprietor, as you’ll benefit from more legal and tax protections. To form an LLC, you could work with a lawyer or use a formation service (which is significantly cheaper). States also have different regulations around LLC formation, but an online formation service that’s already familiar with the rules in your area can help you start your LLC in minutes. Once your business gets started, work with an organization like Virtual Ingenuity to help you maximize your efficiency.
Keep Your Financial Records Organized
A key element of staying on top of finances during a recession will be to know all the small financial details of your business. From cash outflow to pending payments, there is a lot to organize! You can do this easily if your business and financial records are up-to-date, maintained, and easy to access. This can help you find documents for financing or assistance. Struggling to keep these records in one place? Online tools can help you manage and store all your important documents easily. You’ll be able to digitize paper records and keep everything in one file by adding pages to existing PDFs. You can also reorder, delete, and rotate pages in each document.
Find Ways to Cut Costs and Debt
According to the World Bank, interest rates will increase during and after the recession. The general costs for business operations are similarly going to go up. Thus, it’s in your best interest to find ways to cut costs and reduce debt as soon as possible. Here are some ways you can do so:
- Review your expenses: Do you need that expensive office space? Could you downsize to a smaller space or work from home? Evaluate your current expenses to figure out where to cut costs.
- Renegotiate your loans and leases: If your business struggles to make loan or lease payments, Equifax recommends talking to your lender about renegotiating the terms.
- Refinance your loans: If you have good credit, you can refinance your loans at a lower interest rate, thus saving you money.
- Sell off unneeded assets: If your business has assets that it no longer needs, such as equipment or vehicles, selling them can help reduce debt.
- Get help from a professional: If your business struggles to manage its debt, consider working with an experienced debt management company.
The key to successfully navigating any period of financial difficulty is preparation. The more thoroughly you organize your business by digitizing your paper records and setting up your business structure correctly, the more quickly you will breeze through this recession to make it through to the other side.