The year 2020 is shaping up to be a year of economic uncertainty for some business owners. Recent world events have rocked economies around the globe, resulting in profound changes for many small business owners.
With terms like "recession" and "economic down" turn becoming commonplace, small business owners may want to be aware of what is going on. They may benefit by proactively creating small business tax planning, bookkeeping, and accounting strategies to help their businesses stay buoyant in what may seem to be a financially uncertain world.
How Small Business Bookkeeping Can Assist in Good Cash Management
Cash flow management takes on added urgency during times of recession or economic downturn. A failure to adequately manage cash flow may lead to a liquidity crisis.
Your small business may improve their cash position by closely monitoring its small business bookkeeping. This encompasses ensuring that collections, payables, and invoicing are functioning at peak efficiency. Your small business CPA may assist you with this by minimizing the cash conversion cycle for your small business. This can be done by sending out invoices accurately and swiftly. Your small business CPA may also play a vital role in seeing that clients pay invoices in a timely manner while you pay vendors judiciously based on the terms of your contracts.
Some of your current cash management decisions may be affected by your financial position going into the crisis. A small business with a healthy financial position may be better able to weather a recession or economic downturn and might be poised to choose suppliers and staff because they work with your company’s brand and goals as opposed to out of economic necessity.
Determining If Now Is the Right Time to Investigate Alternative Financial Options
Establishing a line of credit now that your small business may need further down the road could be helpful. You may not need to use it immediately. However, knowing that the line of credit is in place may help you and your small business accountant make fiscally sound decisions.
Especially during times of recession or economic downturn, you may need to be judicious when incorporating alternative finance products as an optional part of your cash flow strategy. Fusion CPA’s small business accountants may assist you in making sound financing decisions, considering the current economic downturn.
How Working Capital Surplus Protects Small Businesses during Recessions
Working capital is the difference between the assets you have and your current liabilities. Working capital could include tax inventory, accounts receivable, accounts payable, cash, and any debt due within the next six months.
While working capital does not make your small business recession-proof. It may allow you to increase your competitiveness as it gives you the ability to offer increased credit to your customers, keep stock levels optimized, and offer customers discounts if they pay promptly. While businesses without working capital may be hampered by an economic downturn, a business with working capital may have more flexibility that allows it to better navigate uncertain times.
Guidance from Small Business Financial Advisers to Weather Economic Down Turns
Fusion CPA offers small business CFO business advisory crafted to give your small business an edge when facing an economic downturn. Our strategic planning can help you review your small business goals, assess your financial health, and create a financial plan of action that addresses everything from marketing to payroll and reflects current realities.
Our team of experienced accountants can help you create strategies to create the cash flow you need for growth and productivity. We may be able to help you find that perfect balance, so you won’t get caught short. Are you concerned about how the current economic downturn may affect your small business in the immediate and distant future? You may benefit from tailored small business tax planning and tax strategies designed to preserve profitability. Are you concerned about how the current economic downturn may affect your small business in the immediate and distant future? If so, we are here to help. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
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