Three Ways You Can Help Your Clients Through a Recession

As CPAs, we are all looking for ways that we might help our clients through a potential recession. Prepping for one and determining how you might help your clients through one is always a good idea. The best offense is a good defense as they say!

As a VCFO at Summit CPA Group, I take a slightly different approach to recession-proofing. Rather than plan for a recession, I help my clients “future-proof” their businesses. This tactic places the focus on defining a solid plan for future goals rather than the impending shock of a recession. After all, recessions have bred many innovations for an uncountable number of businesses.

With that being said, I have three tips to help your clients future-proof their businesses regardless if they are worried over an impending recession or not. Let’s dive in!

Improve Inefficiencies

Improving inefficiencies within a business is not only advantageous during a recession, but it is a good idea for business growth, as well. There are many inefficiencies that might be causing your client a loss on their bottom line. Now is the best time to aid them in working on eliminating any of these.

One method for improving cash flow and decreasing inefficiencies is by decreasing the average sales cycle. By helping your clients be creative, they may find ways to close deals sooner. One example might be running a promotion for a 10% discount for customers who purchase a product or service within the next week.

Another inefficiency suggestion I have for you is to help your client “trim the fat” in their business. “Fat” is a resource that is unused and not required for business operation. This fat may be unused equipment, software subscriptions that go unutilized, and many other resources. Often, there are many resources that could be cut to improve cash flow and liquidity right under your client’s nose.  

Help Your Clients Get a Handle on Their Finances

Before a recession starts, it is best for your clients to get a handle on their finances. Reducing any friction in your client’s personal finances prior to a recession will allow your clients to think with a clear mind and seek out resources when necessary.

Beyond personal finances, your client will want to build up a cash reserve of 10%-30% of their business revenue. Having a cash reserve is just good business because your client is able to make decisions with far more ease. It ultimately helps to decrease risk in operating a business.  

Another way to help your clients get a handle on their finances is aiding your clients in making their money liquid. Essentially, your goal is to make their money accessible rather than having it tied up in assets that are not easily exchanged. You might help your clients achieve this by guiding your clients away from long-term strategies that have low chances of return. It can also be helpful to instruct your clients to avoid large purchases whenever possible. Furthermore, it can be helpful to have a line of credit equal to the amount in your cash reserve. Whether it is used or not, having a line of credit easily accessible can help businesses wait out recessions until an upturn begins. It is best to obtain a line of credit before a recession (before you need it most).

Keep Pace of What Is Happening in Your Customers’ Industries

Your clients look to you for expertise, especially during times of economic uncertainty. Keeping up with your customers’ industries will help you better advise them. Aim to find out the trends happening in their industry’s landscape. For example, during times of economic upheaval, the digital agency industry may see a decline in project-based business. Or it may see a loss in clients. On the flip side, the digital agency landscape may see more projects or clients as companies are forced to lay off full-time employees. If you have a niche, you may already know what is happening in your clients’ industries. However, if you don’t have a specific niche, it can be helpful to join networking groups or scope out LinkedIn to discover what is going on in your clients’ industries.

In Summary

I hope this article taught you a few ways to help your clients future-proof their businesses. Taking this approach not only helps your clients get through economic downturns but also aids them in planning for their ideal future. To learn even more ways to help your clients future-proof their businesses, read an article Tom Wadelton, VCFO at Summit CPA Group, wrote on the topic.