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• 15 Nov

  How To Prepare Your Company For A Recession

  

  Recession is something that is feared by most businesses. However, there are some steps that UK companies can take to be better prepared for any economic downturn.

  How To Prepare For A Recession

  This is our list of steps a UK business could take to prepare for a recession.

  A List Of Steps UK Companies Can Take To Get Ready For An Economic Downturn

  Consider each of the following steps to better position your company in the event of an economic downturn.

  1) Building Your Reserves

  Having cash on hand is a great buffer against any recessionary pressures. You may be able to start putting aside money or perhaps you might be able to delay major expenditures.

  You should review your cash flow forecasts to see what you can put aside. If you don't have the cash flow to be able to set aside any reserves, you might consider the benefits of taking out some business finance that can be held in case of need (see the section below about working capital). Remember, it may be easier to secure finance before the economy suffers the full effects of any downturn.

  2) Cutting Costs And Expenditure

  An obvious step is to make your organisation as lean as possible. Review your regular expenditure and look at where you can save on your costs. You might have unnecessary or unproductive outgoings that could be saved. Alternatively, there may be expenses that you could reduce by shopping around.

  This article has some useful tips on business cost-cutting.

  3) Review And Control Staffing

  Part of your effort to review your cost base could be a review of your staffing levels. You may have staff that are surplus to requirements or positions coming vacant that don't need to be filled. Alternatively, you may be able to outsource some functions, rather than employing new members of your permanent staff. If you need your own staff, a part-time temporary role may be more cost-effective than a full-time employee with all the associated costs of employment.

  4) Lock In Your Income

  Seek ways to lock in your income. Perhaps you have clients that purchase on an ad-hoc basis? Could you lock in that trade with a small incentive for a regular purchase commitment? You may also have work that is reaching the end of its contractual period. Again, this could be a good time to lock in future income with a new contract.

  5) Maximising Marketing Returns

  Marketing is an area that is often the first to be cut when times get hard. This can be counter-productive as good marketing can lead to new business and hence new revenue. It could be a good time to review your existing marketing strategy and spend against the results it has achieved. You may be able to make some commonsense savings or better target the money that you budget for marketing.

  6) Ensuring You Have Adequate Working Capital And Cash Flow

  Your cash flow projections should be able to tell you how much of a margin you have between your cash requirements and the cash on hand. If you are anticipating things to be tight or even negative, look for ways to improve your cash flow and generate more working capital. This might include raising new money from financing or taking some of the steps set out in our Guide To Improving Cash Flow.

  7) Protect Against Bad Debts

  As a downturn unfolds, things can get tough for businesses. There are plenty of UK businesses that are on the brink of failure and a recession could trigger their demise. If you have sold goods and services to these businesses on credit terms, you could risk not getting paid if they become insolvent.

  There are various options available to mitigate this risk. A trade credit insurance policy can provide protection or if you already use receivables financing, there are bad debt protection options, called non-recourse, which can also provide mitigation against customer insolvency.

  NOTE

  Please note that the above points are our thoughts on this subject and are provided for information only. This is not intended as a comprehensive list or any kind of advice.

  By Glenn Blackman