According to experts, money should only be borrowed when you can pay it back.
This cannot be stated better, because in businesses the most ideal time for you to prepare for recession is when things are going remarkably well. If you are a businessman in Dubai, then you ought to hire Accounting Firms in the UAE to ensure that business operations run smoothly for you.
Furthermore, it is also better to prepare for a recession when everything is going well. Rather than reacting impulsively in the hour of need, this clever strategy would allow you to act deliberately. Furthermore, it would also give you many options to implement the strategies that could help you sustain your business.
In addition to everything stated about Prepare Business For Recession, it is best to plan for any surprising future recession now as you can never predict it, recessions seldom announce their arrival. One can only tell once they are going through it and that is usually too late to do much. In this blog we have tried to point out everything you need to know regarding Prepare Business For Recession.
Build a cash reserve for your business
The first and foremost thing that happens when Prepare Business For Recession is that your receivable days will increase, and customers will start to pay money more and more gradually. In contrast, the company starts demanding its clients to pay them sooner, the whole scenario ultimately affects the availability of cash. Therefore, if your company does not have a cash reserve, it would be nearly impossible for you to free yourself from the claws of recession.
Always remember that cash flow and cash availability are two entirely different things, and as a business owner, you must never let this distinction slip your mind. There are times where you can get phenomenal profit, but awful flow of cash and no reserve.
In order to build a cash reserve, you should start saving your money either in your bank account or money market instrument, where such instrument can be liquidated easily in a short period of time. You should not stop saving until you are positive that you have enough security.
Manage Payments and Invoices carefully
As mentioned above, some of your clients would probably start taking a bit longer to pay during the recession. Some might never even pay because they might run out of business. The effect of such developments on your cash flow can be more serious than you anticipate. However, the effects can be subsided and even prevented, if you begin to manage your customers’ accounts and start to collect more carefully.
It is also advisable to implement a system, so you can track and collect your overdue. Doing so can also make your business prosper. Another purpose of having a good invoicing and proper collection system is that you would always be able to determine your establishment is heading to the right direction and your assets are being safeguarded. To judge the situation, all you would be required to check the number of clients that seem to change their payment habits. If most of the clients have started to pay slow, this could be an indication of their preparation for lean times.
Pay the suppliers on net-30 or for even longer terms
This approach might sound a bit weird, but it helps you to delay your cash outflow and might balance your cash flow.Furthermore, this also gives an explanation of why your clients take 30 or 60 days to pay you.
Clearly, the best time for the payment is when things are going well overall. You usually have a precedent for paying suppliers on net-30 days terms, when you are confronted with the recession.
Be very careful about new costs
During good times, a good business owner would watch new costs very carefully. If you wonder why watching over the cash during cash flow is necessary then here is your answer.
Always remember that new costs bring along new expenses, and before you know it, the expenses can increase very quickly. Therefore, you need to be watchful because if a recession hits during such time, you might find it too hard to make any change.
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