Even the near future is uncertain when it comes to the economic outlook. That only makes it more important to prepare for a potential recession. With the Bank of Canada raising its interest rates, and many analysts predicting an upcoming downturn, any business owner or manager is best off taking action now, before whatever ends up happening.

Where should you start? We can’t say until we know your situation; book a free consultation with ACM CPA and we’ll tell you exactly what to focus on after considering your unique situation. With proper preparation, you can endure a recession and minimize any losses from increased expenses or disruptions in operations.

Start By Reviewing Your Financial Situation Right Now

It can be tough to take a closer look at liabilities such as loans and debts. On the other hand, it’s essential that you have a clear picture of your finances because your whole strategy will hinge on it.

Make some cash flow projections, if you know how to, along with debt ratios and a summary of the payments you’ll surely need to make each month. To do this, your bookkeeping needs to be accurate and up to date — when’s the last time you made sure of this? Luckily, there are easy ways to reconcile your accounts even if you have no bookkeeping experience

Improve Your Finances In Advance; Make These Changes

Consider what strategies you can implement, as soon as possible, to funnel (or free up) more cash into your business. For example, take a detailed look at your costs to find every day you could reduce spending if necessary. This may include negotiating with suppliers or exploring cost-effective solutions like switching to digital processes.

A bolder strategy would be to increase revenue altogether. For example, you could market to new audiences or diversify your products. In uncertain economic times, many entrepreneurs’ secret weapons is that their business models are diverse and able to accommodate possible changes in demand. Evaluate the market you are operating in and identify areas where you can diversify or expand your reach; you want to avoid becoming too reliant on one sector or set of customers.

Managing Staff Is Tough During A Recession. Here’s A Tip

The last thing you want is to feel forced to lay off an employee who handles significant responsibilities, which will consequently land on other shoulders. You might even have to pay severance — extra expenses with no benefit to you. Right now, you can think about options that may help minimize layoffs, such as incentives for transitioning employees into different roles within the company.

Alternatively, create a plan for how to handle layoffs in a way that avoids some disruption in your operations. And don’t forget to prepare adequate resources that support employees who are forced to leave your workplace, even temporarily.

Everyone Needs A Backup Plan. These Are The Best Ones

A contingency plan will help your business stay afloat even if things don’t go as you planned and prepared for. To make a backup plan that actually saves you, make sure you think hard about what liabilities would affect you most and how that might play out.

Once you have identified them, you can brainstorm strategies for dealing with them. This should include both short-term and long-term solutions so that your company is ready no matter how long the recession lasts.

Recessions Lead To Cash Flow Issues. Here’s A Cure

Now is the time to reassess your financing options. If your budget is looking tight or sketchy, consider taking out an additional loan. To protect yourself, review the terms of existing loans, or renegotiate loan agreements with lenders.

If a recession does hit, everyone will have a much, much harder time getting a loan, even as their cash is drying up. But your business will be in a better position because you’ve already secured enough cash flow to operate comfortably.

The Biggest Takeaway? The Best Recession Planning Starts ASAP

Being prepared for a potential recession is not just good business practice; it’s essential to ensuring your business remains profitable during an economic downturn. By taking the time to review your financial situation and consider strategies now, you can be better equipped if a recession does occur.

Business owners can’t afford to wait until it’s too late — start planning now so you’re ready when the economy takes a downturn. Book a free consultation with ACM CPA so we can give you a full analysis of your business and help you get ready for the recession.