Recent reports suggest we may be heading towards another recession, and now’s a better time than any to start preparing. In this article, Bitsent explores a few of the key strategies to help position your business so that it can survive declines in employment, income, and interest payment shifts.
The first item on your agenda is to clear any outstanding debt. It’s important to do this earlier rather than later as interest rates are likely to rise and, during the volatility of a recession, you may lose the ability to do so altogether. To help with this, CreditCards.com notes that it may be possible to negotiate a rate reduction with your credit card issuer; make sure you read up on the best methods for this before calling. Alternatively, you could seek a balance transfer card with a lower rate (although it should be remembered that this strategy is only advantageous in certain circumstances).
For a small business, cash flow is vitally important, and if you’re wasting time and resources chasing up late payers, you’re not working on your business (or investing those funds productively). Make sure you update your payment terms now to ensure prompt invoicing, 30-day periods, watertight contracts, and multiple forms of payment (such as Paypal or Wise). You should also put protocols in place to follow up with clients in a professional manner, should they be dragging their heels.
Having reserves as a small business can be a tricky one to get right. All of the money you’re not reinvesting back into the company is not really serving a function, however, in the event of an emergency (which is more common throughout a recession), having a cash supply you can draw upon can prove essential. Make sure to identify a cap limit and begin by allocating a percentage of your monthly/weekly revenue into a savings account.
In the precious time before a recession, it’s important to reassess your budget. Take a close look at expenses, recurring costs, and contracts to see where you might reduce your expenditure or renegotiate better deals. You should also consider whether any changes to the sheet will affect the operational ability of your team to create profit. Connecteam.com points out that a good place to start is with any extraneous utility bills, software subscriptions, or office contracts.
It’s easy to disregard the importance of how your business is structured, but the formation of your organization can affect its ability to survive throughout a recession. An LLC, for example, offers pass-through taxation, self-employment tax savings, and the option for business owners to claim losses as tax deductions. If this is something you’re considering, it’s often worth using formation services to help you navigate state regulations and save on lawyer fees. Before moving forward with the formation process, read Zenbusiness reviews by BestLLCServices.com to find the best available services.
It may seem simple, but keeping your logistics squeaky clean can make all the difference when it comes to weathering a recession. This means storing, itemizing, and reviewing business/financial records to ensure they’re up to date and accessible in a pinch. Online tools can help you to digitize documents, then edit, reorder, delete, and rotate pages.
You never really know to what extent or how your business will be affected by a recession but preparation is key for survival. Take the time to re-evaluate your debt, savings, business structure, and organizational approach to see if you can position your business advantageously.
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