A significant concern for any business is the threat of a recession. The question isn’t if you will have to face a recession, but when. This is enough to give any business financial worries, but the good thing is that you can prepare now and weather the storm. Here are SMART tips to help your business prepare for any potential financial bumps in the road.
Create a Spending Plan
First off, if your business is to thrive financially, you must make a spending plan. That is a budget where you predict how much you’ll need to spend over the year. If you plan for what is outgoing, you can assign every dollar to an expense or savings.
Having a predicted spending plan can help you from going over budget too. This is because it provides a clear guide of what needs to be spent where. Additionally having a predicted spending plan is very helpful when it comes to making forecasts on profits for the future as well.
Spending Reports
It is vital to remember that while plans are good, they aren’t as effective without regular spending reports. That is feedback on specific periods with a breakdown of how much money was spent. In fact, it is the comparison of the reports to the plan that allows your business to see whether it is on track. Something that can be valuable because it will enable adjustments to be made if the trend is towards an overspend.
Register for the Appropriate taxes
Next, businesses that are smart financially never overlook outgoing costs they have to pay. The most important of these being the various taxes that are due for companies in your industry or area. After all, you can get into some serious and costly trouble if you neglect to pay these.
Of course, it’s not all bad news because many businesses are eligible for tax breaks depending on their industry or location. In fact, in places like Australia, all companies have to register for gst or goods and services tax. However, those involved in the production process can usually apply for a rebate. This being something that can make the buying of resources much more economically friendly to their business.
Cut Outgoing Costs
Finally, if you want your business to thrive, you must learn to reduce your outgoing costs. In fact, just a small price decrease on a single unit item can, when multiplied by the 1000s you use in your business, save you a great deal of money!
In fact, a small change like this can have a significant effect. One that means there will be more left on the profit side of your business’s equations when all the figures are in. Which is, of course, the main goal of any business’s financial management strategy.
Keep Calm and Carry On
We may not be able to control our circumstances, but we can control our behavior and how we react to our circumstances. Becoming emotional and reacting in a knee-jerk reaction will only lead to bad decision-making.
By staying calm, you can avoid emotional decision-making, and look at the situation in a calm way. This will help you see opportunities that you may notice that others don’t. Take inspiration from Roger O’Steen of Jacksonville and his company The PARC Group. Despite the 2008 recession, the continued with their plan to continue building their real estate projects.
While most developers closed up shop, they believed in what they were doing. In the end, it became the best decision they made. As the economy turned, they were in prime position to take advantage.
Be Transparent with Your Employees
If you to manage your team well, make sure that you are being honest and transparent with them. When employees feel they are being lied to or not understanding what is going on, it could create a culture of mistrust.
Whether you have to layoff employees or give a pay cut, your employees will be more appreciative when you tell the truth. Explain the situation and in some cases, instead of some hurting a lot, they may opt that all hurt a little, so you don’t have to lay anyone off.
You will also find that your employees can come up with innovative ideas that can set your company back on track and stronger financial footing. Treat your employees like adults and trust them!
The Right Investments
You can feel the temptation to play it safe during a recession. Many financial downturns can set off a chain reaction that encourages new technology. Investing in technology at this point is crucial.
You don’t have to put much money into something like technology. Make sure you put money into the right areas. During economic downturns, the main impact is on skills shortage. The cities hit hardest by the recession saw a demand for computer-related skills.
Investing in technology at this point might not sound sensible. But in theory, the opportunity cost is lower than during good financial times. You can find out your operating budget can stretch further during downtimes.
Rather than sitting there and panicking, use the recession as an opportunity. Every business has financial concerns. However, we spend a long time worrying about the future when we should focus on the present.