Why having an accountant is important during recession
A recession is defined as a business cycle contraction where we see a general decline in economic activity. Having a balanced and pragmatic approach during worrying times like these is key to business continuity and success.
This is somewhere that an accountant worth their weight can show their true value by providing strong, but more importantly, accurate advice to clients, whether they require business or individual accountancy support.
If you are wondering whether to hire or maintain an accountant during a recession period, the below may give you an idea of some of the ways in which your chosen accountant could be supporting you.
Accountancy support during recessions
When a recession hits, it can be tempting to go on a cost cutting spree and one avenue of this could include debating the elimination of your accounting support. Whilst this may seem like a quick win in the short term, when your business is under stress the best chance you have of staying in a strong financial position in the long term is by engaging the support of a trained financial expert who can keep an eye on expenses, manage available capital, offer suggestions for cash flow improvements and more.
Another point to note here is that should you decide to attempt your business accountancy or bookkeeping yourself, you risk making mistakes such as paying too much or too little tax that could lead to significant problems later down the line (or simply cost you more than it should). If you entrust a qualified accountant here, you can rest easy that everything will be taken care of for you, freeing you up to focus on revenue generation.
Cash flow maintenance during recessions
During a recession, as a business your main priority is likely to be cash flow. If cash flow of a business, in particular a small business, is stretched or restricted, the business will suffer the consequences – even if it appears profitable on paper.
If you have an experienced accountant on hand to advise you on how to leverage cash within the company, you as a business are likely to be in a stronger position than competitors who are not receiving this same advice.
You could then have the opportunity to invest in marketing that your competitors are not, enabling you to capture potential new leads in a time where these may be few and far between. This approach of maintaining cash flow will likely also enable you to be in a position to invest if a suitable buying opportunity arises.
Planning and risk management during recessions
Accountants are fantastic consultants and allies when it comes to planning for your business's future. Whilst it is essential to have a short-term strategy in place during a recession, it is also fundamental to plan for the long-term future. Conducting this analysis enables a business to deal with any potential issues that may arise, as well as forecast and provide resolutions to both best- and worst-case scenarios.
All of the above is part of business risk assessment and management which is important at any stage of the economic cycle, but especially so during a recession.
By being aware of any risks that threaten you as an organisation, you and your accountant can strategize effectively moving forwards.
The resolutions to issues highlighted in this risk management could be anything from employing the use of better, more suitable software, to making business acquisitions or updating your regulations. By working alongside one another, you and your accountant can address any external or internal factors that may affect the business as well as planning for the future.
Business cost management during recessions
Another vital area that your accountant can support you in throughout a recession is managing your businesses costs. As an external person reviewing the business in an open and honest way, accountants will highlight viable cost cutting exercises, but is also there to investigate other, more creative cost cutting solutions that you may not have previously considered. These solutions could include rectifying common issues you as a business face such as order processing or customer communications, to streamline the way you and your team operate.
Your accountant can also advise you on staff management and employer best practices such as establishing alternative communication methods to minimise employee travel and meeting expenses or reviewing the hours your staff work to achieve maximum efficiency.
Whether the economy is in the middle of a huge boom or is slipping into a recession, an accountant's balanced and highly pragmatic approach to business can act as a levelling force enabling any business, no matter how large or small, to withstand any economic climate.
If your business requires support in this concerning time, then please do not hesitate to get in touch with a member of Keith Graham's highly experienced team of accountants who will be more than happy to discuss your options.