With so much political and economic uncertainty in the world at the moment, more and more U.S. companies are starting to get worried about a potential recession. And since different industries tend to slip into recession at different times, it would be a savvy business move to create a preparation plan for recession before you need it.
How do you make sure your company is ready for a recession? Here are three effective strategies that you can implement now to prepare for the future.
1. Protect Your Cash Flow
Recession or not, you’ll always have cash flowing out of your company. What you should focus on instead is protecting the cash coming into the business. If you have customers and businesses owing you money or services, communicate with them often and clearly. If you have specific billing practices and patterns, make sure they’re used to them.
Also, keep in mind that these customers and businesses will be in the same boat with you when the recession hits. Do your best to weather the storm together by reminding them how important they are to your business. When they pick the bills they want to pay first, your company’s invoices should be at or near the top of the pile.
2. Evaluate Your Operating Costs
Reduce your expenses where possible – but do it smartly. Buy less expensive office supplies, renegotiate the office space lease, and reevaluate whether your business needs certain services to survive. You should also consider investing in trade credit insurance, which usually costs only a fraction of the percentage of your insurance amount.
Finally, take a closer look at your staff. If some employees want to leave your company, ensure they do so before the recession – not during. If you need to lay some people off, put a lot of thought into it beforehand. The last thing you want is to shrink your staff to the point that you won’t be able to efficiently provide for your customers.
3. Use Credit Card Surcharging to Lower Expenses
In a recession, surcharges could be a lifeline for businesses struggling to stay afloat. For example, the COVID-19 pandemic and the subsequent shutdown led to small business revenue dropping by 52% and payroll expenses dropping by 54%. By adding surcharging costs, you can offset this lack of revenue without raising your prices and upsetting customers.
Let’s say you run a dental clinic that collects its revenue in two ways: $460,000 from insurance payments and $300,000 from credit card payments. If your clinic has somewhere in the area of a 4% processing rate, you’re paying around $12,000 in fees each year. The best way to cover those costs is to utilize credit card surcharging, which almost eliminates your processing cost and puts more money back into your business.
If you would like to learn more about credit card surcharging and help determining if it is right for your business, please get in contact with our office today.