Know your options, strategize and be prepared.

A recession can cause significant harm to a business that is unprepared for one. Looking at all the factors that impact your business can help you plan how you will conserve cash, restrain spending and make it through a recession on solid footing. Here are recommendations, from an accounting and operations perspective, that you can incorporate into your businesses to help proactively prepare if an economic downturn occurs.

Four Areas of Emphasis

  1. Business Operations
    • Fine-tuning your operations to ensure your business runs as efficiently as possible during a recession is crucial. Especially with current shortages of materials and labor. This can make a huge difference when managing costs and cash flow during a recession.
    • Understanding factors that are out of your control so you can focus on what’s controllable for the sustainability of your business. The companies that focus on what they do best first, then on what needs to be improved, are the ones that succeed during uncertain times.
  1. Understand your Finances
    • It is crucial to understand your company’s variable costs, fixed costs, cash flow, and net and working capital, as a business owner, lender, or stakeholder of the business. Remember; you already have this financial information. So, make sure you are reviewing it real-time to understand how your company is performing and where changes are required.
    • Cash flow
      • Amid uncertainty, one of the most effective measures business owners can take to prepare for the future is cash flow forecasting, a detailed analysis of your cash going forward. Typically, a statement of cash flows examines the sources and uses of cash flow from three primary categories:
        • Operating activities have the most significant impact on the statement. This section details the sources and uses of cash from your Company’s daily operations. a business requires to run each month.
        • Investing activities explains the source and uses of funds used for capital investments within a business. The most common use of cash for investment purposes is the purchase of real estate and capital expenditures.
        • Financing activities: explains the sources and uses of funds used to finance the business. Debt service is the most common source and use of cash for investment purposes.
      • Cash flow forecasting is a tool that can help you maximize cash flow and take advantage of opportunities in down markets. A forecast utilizes historical data on the sources and uses of cash: revenues, vendor payments, payroll, rent, debt service, etc. to produce forward-looking projections going out 13 weeks up to 12-24 months.

  1. Key Stakeholders
    • Principal with advisors who can guide you in making smart decisions that allow you to overcome obstacles throughout this economic cycle. Communicate regularly with key stakeholders, including executives, advisors, bankers, lawyers, employees, customers and vendors. These people are imperative to the success of your business and have a vested interest in helping you. Transparency and open communication around your challenges is crucial so you can help one another.
    • Tip – If you do not already have a solid banking relationship, speak with your lending institution now about credit availability. It is wise to request increases in credit early because it may take some time to process when a recession is declared. A line of credit can help with gaps in cash flow or ongoing operational needs such as utility bills or rent. Don’t wait for an emergency – act in advance and be prepared.
  1. Automation & Technology
    • Access to materials, labor and rising costs are expected to be challenges faced by companies regardless of the economic climate. Are there opportunities to increase efficiency by using technology to streamline manual processes?
    • It may seem counterintuitive to invest in technology automation or outsourcing on the cusp of a recession, especially with high inflation, but improving your processes can help you cut costs and operate leaner into the future. Besides streamlining your operations and financial management, updated technology systems can help you leverage staff in a challenging labor market. The need to do more with less is critical.
  1. Opportunities
    • Are you considering new opportunities like mergers, acquisitions or real estate investments in a changing market? Recessionary times open doors to new opportunities. If you’re looking to grow, transition your business or buy a competitor, strike while the iron is hot. Recessions are an excellent opportunity to grab market share and increase investments. Instead of accepting the downturn for what it is, look at it as an opportunity for growth.


While the future looks somewhat uncertain, the decisions you make today can significantly impact your success, or lack thereof, during a recession. All the above areas can be part of a productive discussion with your CPA. They know your business and have seen the successes and tribulations of many other companies during good and bad times.

Contact your Adams Brown advisor or Sean Kennedy, Strategic Business Consultant.