The pandemic taught us that being highly resilient is crucial for the long-term survival and success of our businesses.
After all, resiliency is what allows you to withstand and then manage any challenge ahead. Equipped with resilience, you can keep your business sturdy amidst various disruptions in the environment, including the growing threats of recession.
But how can you remain prepared and resilient over the longer term, especially with rising inflation, economic uncertainties and volatilities in the market?
No worries! We’ve compiled some simple tips to show you how your business can thrive despite everything that’s predicted in the year ahead.
What is business resilience?
Business resilience refers to the ability of a company to withstand and recover from disruptive events such as natural disasters, economic downturns, regulatory changes, entrance of new competitors, product recalls or cyber-attacks by having the right strategies and resources in place to minimise the business impact of these events and get back up and running as quickly as possible.
This can include things like having a business continuity plan, disaster recovery procedures and backup systems in place. It can also involve having a flexible and agile business model that can adapt to changing circumstances.
The importance of being business resilient in a recession
During a recession, the economy slows down and there’s a general decline in economic activity. As a result, businesses can experience decreasing sales, lower profitability, cash flow pressure and stagnant growth.
However, by developing business resilience, you’ll be able to cope with economic downturns and navigate the challenges that come with them. Building resilience also allows you to seek out opportunities where others only see risk and adversity.
But most importantly of all: being resilient enables you to maintain the quality of service you deliver to your clients. This, then, protects the integrity and overall reputation of your brand – today and for many years to come.
7 business tips to become resilient in an impending recession
Fortunately, there are ways to strengthen and prepare your business for threats in both the macro and micro market.
- Understand your current business model and check your cash flow stability.
Start by making sure that you always have a healthy amount of liquid cash in your business’ bank account (or immediately on call) to sustain your operations and continue to repay any debts if they fall due ahead of schedule. Some businesses stick to a “3 month ahead” rule when it comes to cash flow. Others monitor their Working Capital Absorption (WCA) and other liquidity ratios and metrics.
It’s also helpful to have a clear view over your cash runway, including how much cash you can expect to come in and what amount is being locked in by creditors, so you can effectively manage your finances during the time of recession. For instance: what are your debtor and creditor days? Can these be improved?
- Do credit checks on your customers.
You never want to do business with someone who can’t pay you, especially during a recession.
This is why it is critical to assess the credit risk of your new and existing customers. Doing this will enable you to grant the appropriate credit terms while also safeguarding your own finances from risk.
Some strategies you can use to carry out credit checks include:
- Reviewing credit reports, published accounts and online credit sites – for example CreditorWatch (https://creditorwatch.com.au/) or Equifax (https://www.equifax.com.au/)
- Requesting for bank and/or supplier references
- Tracking payment performance
- Talking to other clients and businesses in the industry
Your finance function should be proactive in doing this. If your finance department isn’t able to do this effectively, speak to us.
- Build and solidify your relationship with your trusted suppliers.
Getting the best deal from reliable suppliers can help your company weather any downturn. So, try to build healthy relationships with suppliers that have established businesses and are not facing any credit crunches themselves.
To improve business stability, it also helps to connect with your industry’s biggest players. Working with them, using them as inspiration or creating a partnership can help solidify your position.
- Review your subscriptions’ cost relevance and streamline when needed.
With the threat of recession, this has become even more important. To improve your business’ balance sheet, review any potential to reduce debt and minimise unnecessary operational costs where possible.
One simple way you can do this today is by reviewing your multiple subscriptions and cutting down on ones that are not relevant anymore or for which you are not utilising all of the licences – they can really add up after a while! You can also review your other processes and systems to check what can be streamlined, so you can eliminate other redundant costs.
- Have a good grasp of your sales pipeline.
How well is your business performing despite all the challenges and threats that surround it?
Make sure that you have all the data and numbers you need for effective analysis, so you can monitor if you’re experiencing any drop in sales pipeline or customer numbers. This way, you can pinpoint problematic areas and take remedial action like adjusting your prices, increasing marketing efforts, pivoting product or offering discounts and promos.
- Review your current resources and assets to assess areas where you can be more cost-effective.
If (and when) a recession hits and has the effect of tightening your business’ finances and cash flow, can you still afford to pay for the same number of resources?
For instance, there might be employees who are performing work that could otherwise be replaced with efficient technology and process flow changes, or they’re not being fully utilised to earn revenue-generating value for your business yet, still costing you a lot every month. This might be a good opportunity for you to start consolidating and streamlining some roles to further cut any inefficent costs.
Here’s an idea.
At Dexterous, we offer a hybrid approach that combines a global workforce with innovative technology. Our team serves as your external finance department working internally for your business. We take care of your business’ financial function, so you can be more agile and capable of scaling throughout a recession and beyond – all without the excessive headcount expense.
Learn more about how we can help you cut costs and not productivity with our Finance Department as a Service solution here.
- Get CFO Advisory to support your business and achieve growth amidst the recession.
We, at Dexterous, also provide CFO Advisory for those businesses wanting to elevate their performance through financial strategy. So, if you need more strategic advice or accountability in your business, we have CFO experts ready to assist you.
We can help you map out what the next 6 to 12 months may look like for your business, as well as support you in building projections and assumptions that can then help you make more strategic decisions for your long-term success.
Want an instant and reliable finance department to help you deal with any business challenges?
At Dexterous, we go far beyond virtual bookkeeping and external accounting services.
We provide a turnkey managed finance solution that works for you through a financial, operating and growth lens. This means that we leverage all the latest business tools including Robotic Process Automation (RPA), access global talent and manage your finance department with the local expertise of our Sydney team.
We also equip you with a strategic approach and cost-effective function not just to address the challenges of recession today, but to also help you thrive and achieve more growth in the future.