There’s been a 25 per cent jump in the number of businesses facing “critical” financial distress, according to a recent Guardian report. 

More than 47,000 UK companies were on the brink of collapse in the final few months of 2023. 

These figures are startling, not least because numerous news outlets are now suggesting that we are on the brink of – if not already in – a recession. 

It raises a few questions among SMEs:  

• “How can we create resilience during these harsh economic times?” 
• “What can we do to protect our business from insolvency?” 
• “How can we prepare our finances?” 

Our advice to you 

If we really are on the brink of recession, then businesses need to prepare for the worst. 

You should be looking at both your operations and your finances and reassessing your goals and priorities for the coming months. 

We can’t tell you how to run your business, but we can give you some financial and tax strategies for reducing the impact of the recession on your business. 

Unfortunately, a single blog post is not going to give you all the information you need to survive in the current climate, and we strongly recommend that you speak to one of our accountants about your specific circumstances as soon as possible. 

Having said that, here are some of the strategies we are currently suggesting clients consider: 

• Rethink your liquidity: During a recession, it doesn’t hurt to have a little extra cash lying around for a rainy day. This can help you pay off unexpected expenses and give you the ability to invest when opportunities present themselves. 
• Manage your cash flow: Make sure you are staying on top of what is coming in and out of your accounts. Use your cash flow predictions to your advantage and learn when to save, when to invest and when to expand. 
• Cut unnecessary costs: Now is the time to review your expenses and identify areas where you can cut back. This could mean renegotiating contracts with suppliers, reducing office costs, or finding more cost-effective ways to market your business. 
• Re-evaluate your business model: The market is constantly changing, especially in a recession. It might be worth considering a pivot or diversification of your business model to adapt to the current economic environment. 
• Keep a close eye on Inheritance Tax and Capital Gains Tax: It’s crucial to understand how these taxes can affect your business and personal finances. Effective tax planning can help mitigate the impact of these taxes on your assets. We are always ready and willing to discuss these with you in person or over the phone. 

While these are a good starting point, they are most effective when directly applied to your specific business needs and financial situation. 

The best way to utilise and apply these strategies is with the help of an experienced accountant. 

We can also advise you on Government grants, schemes, and funding opportunities that might provide a little extra cash during a recession, so please don’t hesitate to reach out.  

If you want to prepare your business and grow your financial resilience, please get in touch.