How can businesses prepare for a recession?
Mr Bankruptcy
9th June 2022
As the UK and global economies continue to struggle, businesses have to look for ways to survive these challenging times. Following forecasts from the Bank of England, should this include preparing for a recession?
Is recession on its way?
Inflation has now reached a 40-year high, at 9% and things are predicted to get worse during 2022. This led the Bank of England raising the prospect of the UK going into recession towards the end of this year.
With many people forecasting that more harder times lie ahead, now is the time for businesses to look at how they can protect themselves from the worst effects.
Actions you can take
Businesses need to determine their ability to weather an economic decline. Understanding your liabilities and key areas of business risk early on can help you to protect those areas of weakness, or at least to identify the point when more direct action is needed.
These steps that can help mitigate the impact of a potential recession:
- Build relationships. Maintaining good communications with customers, partners and suppliers is important because the way they continue working with you could make all the difference.
- Build new sources of revenue. Avoid becoming reliant upon a couple of key customers to supply your income as your fate will be more tied to theirs than it should be. It is also beneficial to find opportunities to diversify products or services so that if one is a flop, the others continue to provide an income.
- Manage cash flow. Review your expenses and outgoings, build a reserve and managing customer debts to protect your cash flow and cope with inflation-driven rises in costs.
- Regularly review your finances. Be aware of your financial position, review it regularly and track changes. This will help you to plan for the future and give you a realistic overview of your financial situation.
- Keep on marketing. You may need to review your marketing channels or change your approach, but it’s important to continue tapping into new markets and re-invigorate existing ones to maintain a strong customer base.
With UK company insolvencies increasing by 39% in March alone, many businesses are struggling already and we should all be preparing for more challenges ahead.
James Rosa Associates
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