In Pursuit of Profit
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During a recession, too many organizations try to cut costs indiscriminately. The savviest organizations, however, lean on the data to determine when to trim and when to ramp up spending to capitalize on new opportunities. A Harvard Business Review study from the 2009 recession showed that companies that strategically increased spending sooner actually weathered the downturn better. Shrewd business owners who knew when to cut and when to spend recovered lost revenue more quickly and positioned their businesses better for long-term success.
Companies that do not currently employ an accountant may be hesitant to hire one during this downturn due to the expense associated with doing so. However, some circumstances call for an experienced accountant, and a recession is one of them.
Organizations that want to reap the benefits of having an accountant during a recession can outsource these activities to an accounting firm. Outsourcing provides an avenue to leverage the experience of a trained financial professional while avoiding the steep cost associated with hiring someone in-house. Whether an accountant is hired internally or utilized in an external consulting role, this individual can strategically manage expenses, adjust business projections, maintain proper financials during business shifts, and plan for the organization’s long-term needs.
Eliminate Unnecessary Expenses
Accountants are uniquely positioned to identify unnecessary expenses. Their objectivity makes them a strategic ally, especially in lean financial times. In areas where costs cannot be avoided altogether, your accountant can also advise on when and how to defer expenses to maintain healthy cash flow when sales and profitability are down. Accountants can provide an accurate picture of which vendors need to be paid. They can also suggest which vendors should be paid more slowly (or quickly).
On the flip side, your accountant can also isolate top revenue-driving activities to preserve the most lucrative areas of the company. Understanding where the organization is succeeding informs everything from budgeting and purchasing to staffing and marketing. Prioritizing key revenue components creates a framework for the business to utilize throughout the entirety of the recession.
Adapt Forecast Models
Whether they were well-anticipated or suddenly encountered, economic recessions will always affect purchasing at least to some degree. An accountant can help a business to realign projections during market downturns. Adjusting forecast models is crucial for anticipating the short and long-term effects of the recession on your organization.
Assist during Downsizing
Strategic downsizing efforts and workforce reduction measures have a clear financial component that your accountant will need to manage. An accountant can advise on what the financial implications will be when discontinuing product lines, closing locations, laying off or furloughing employees, switching vendors, and canceling contracts. Lean on your accountant’s experience to understand the full cost and tax implications of these types of activities before engaging in any downsizing measures.
Keep the Books through Transitional Periods
Your books need to be kept in good order when shutting down or curtailing operations. Still, they also need to be properly maintained when the recession begins to lift, and the business seizes new market opportunities. As your organization starts back up, your accountant can create detailed planning scenarios to respond to market changes with various time horizons.
If cash is the lifeblood of business during ordinary times, how much more important is cash when the market is recovering? Throughout transitional periods an accountant will also prioritize cash flow, giving your company a competitive advantage over others that have been making uninformed or “off the cuff” financial decisions throughout the recession.
Reduce the Tax Burden
Long-term financial planning is one skillset that sets accounting professionals apart. Business owners, bookkeepers, and anyone else that touches the company’s books can easily find themselves overwhelmed during a recession. Their view from in the weeds often does not allow for effective long-term planning, especially as it relates to a tax strategy. Business owners worried about making payroll and navigating new recession-era government regulations are likely not looking far enough ahead to worry about taxes. However, as business shifts occur during and after a recession, your accountant can look for ways to reduce the organization’s tax burden.
Additionally, an accountant is well-informed enough to recommend available government programs and make the necessary adjustments to the books to reflect these obligations.
If you only have a bookkeeper on staff right now, find out how to transition bookkeeping roles to an accountant instead.