When planning for a recession, it’s crucial to examine your finances carefully and make informed decisions that will help your company in surviving a recession. Your bookkeeping needs will be met by opting for reliable bookkeeping services. In today’s blog, we’ll discuss what should be done to survive in case of a recession.
How a Bookkeeper Can Help You Prepare for a Recession?
The income statement, balance sheet, and cash flow statement are the three financial statements that any Melbourne bookkeeper creates for your company as part of your monthly bookkeeping. These financial statements give you useful details about your earnings, costs, assets, and obligations that you can use to make adjustments and ensure the long-term stability of your company.
Don’t merely file your income taxes using financial statements. Additionally, you may utilise them to recession-proof your company so that you are equipped to withstand any economic downturn.
Income Statement
The income statement reveals the profitability of your company over a specific time period. It shows important statistics including your income, expenses, and profits or losses. By assisting you in understanding your past, these measures make future planning simpler.
- Your revenue, which is the main source of funding for your company, is the first metric. When preparing for a recession, it’s crucial to concentrate your sales efforts on customers who have constant demand—regardless of the economic climate.
- Your expenses, which may be split into fixed and variable costs, make up the second metric. Consider your fixed expenses as the ongoing spending required to simply maintain the operations of your firm, such as rent, insurance, and utilities. Depending on how much business you’re conducting, your variable expenses, such as labour or cost of goods sold, change. Consider your fixed expenses and search for methods to reduce them as you get ready for a recession.
- The profit is your third metric. As a firm, you can increase sales, but if your margins are low, you won’t make any money. Therefore, when preparing for a recession, you need to look for new ways to enhance your margins.
Balance Sheet
The balance sheet shows a clear picture of your business finances. It tells you about the liabilities you owe, the assets you own, and the equity in your business. While preparing for a recession, consider looking at your balance sheet to check how much debt you need to pay and create a business budget plan that helps you pay it sooner. A bookkeeper can help you maintain a balance sheet for you so you can make informed decisions for your company.
Cash Flow Statement
With a cash flow statement, you’ll come to know how much cash you have and how much you are spending for a specific period. Typically, a cash flow statement helps you know the cash coming and going out of your business. It is important to monitor cash flow, especially when it is a recession time when the inflow of cash is slower than the outflow of the cash. You can request a cash flow statement from your bookkeeper services provider to better understand your cash flow patterns. As a result, you can identify ups and downs in the cash flow. A professional bookkeeper can help you create a cash flow forecast to know your upcoming income and expenses to ensure you have sufficient cash on hand to pay your bills if a recession happens.
Maximise Your Tax Deductions
The last thing you need when your business gets ready for a recession is a high tax load that uses up a lot of its available funds. Bookkeepers and tax return accountants work with you to maximise your tax deductions and benefit from government initiatives that can lower your tax burden. Apart from this, they can help you explain to you how these governmental initiatives affect your taxes.
Conclusion
You need to stay on top of your business finances and business books even in the event of a recession. For this, you need to have a professional bookkeeper by your side to manage everything on your behalf for you. Moreover, you can also get in touch with a Reliable Bookkeeping Services provider.