34 THE QUEENS COURIER • AUGUST 2, 2018 FOR BREAKING NEWS VISIT WWW.QNS.COM
Business Strategies for The Next Recession
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Co-Author of the
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“Breaking the Tax Code”
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Salvatore P. Candela, EA, ATA, ABA
Enrolled Agent - Tax Advisor
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BY JOHN SAVIGNANO, CPA
With nearly a decade of economic
expansion underway, it’s only natural to
wonder when the cycle will turn to recession
once again. Many analysts agree that
a downturn is likely within the next couple
of years and that companies should
prepare sooner rather than later, so they
can avoid being caught off guard when
the economy slows.
To that end, smart leaders are partnering
with accounting firms that have
proven track records of helping companies
hold steady during challenging economic
times. You want to make gradual
moves that don’t impact business too significantly.
We know the downturn window
is within the next five years or so,
which means companies should begin
implementing strategies now that will
save them time, money and energy down
the line.
The following are three strategic moves
companies can make to strengthen their
financial positions.
Increase cash reserves
A characteristic of any recession is a
tight credit market, which puts companies
in a bad position if they’re dependent
on financing and loans. It’s important
to begin building cash reserves that
will help you stay afloat on your own, as
banks are the first to pull back when the
economy dips. Companies can raise capital
or borrow well in advance of a downturn.
We advise that stockholders take
less in dividends to increase retained
earnings for the core business.
Implement cosіtsaving
strategies
In a healthy market, companies tend to
over-hire and let their business expenses
get out of hand. To prepare for a downturn,
businesses must focus on efficiency,
practicing need-based hiring and conducting
a close analysis of their fixed
costs, trimming expenses where possible.
Retailers may also want to decrease the
amount of inventory they keep in-house,
so they don’t get caught with product that
they can’t sell.
It’s smart to begin looking at your existing
contracts with your business partners.
Re-negotiate contracts such as lease
agreements to reflect more favorable
terms and revise policies to tighten up on
discretionary expenses such as advertising,
travel and entertainment.
Invest in technology
It may seem counterintuitive to spend
money on new technology when you’re
trying to save. However, software and
digital tools that allow you to cut costs
in other areas and streamline production
will strengthen your resilience against a
downturn. Businesses should consider
critical system upgrades that will allow
them to continue building their current
sales channels as well as venture into new
markets to diversify their offerings.
Since all business is relationship-based,
it’s also worth looking carefully at the
impact a downturn could have on your
customers, suppliers, lenders and investors.
After all, the way you protect these
partnerships could mean the difference
between surviving and going belly-up.
John Savignano is a partner with
Savignano Accountants & Advisors located
at 47-46 Vernon Blvd., Second Floor, in
Long Island City. If you have any questions
or require additional information, please
call John at 718-707-0955.
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