With the UK going through a sustained period of ‘stagflation’, a time when inflation is high and economic growth is slow, falls in income and rising costs are expected. 

Prime, which has offices in Birmingham, Solihull and Coventry, said businesses need vision with deadlines and self-discipline to help them achieve their goals.  

Jamie said: “Cutting costs and saving money isn’t just about a few big changes instead, lots of small changes to make one big difference.”

What to expect

He added: “When a recession hits, everyone’s income gets squeezed. This means more people will be looking for cheaper rates, creating temptation for businesses to reduce their prices just to keep sales. However, this could be a make-or-break decision for companies, as thin margins lead to greater loss. 

“Add this to the rising cost of energy and overall running costs of a business, innovative and creative companies could be forced to fold before they have a chance to flourish. “

How to prepare

Jamie said the first and most vital thing businesses can do is to think long-term. 

He said: “From my experience, it’s the companies that make quick short-sighted decisions that fall at the first hurdle. Businesses need to have clear goals and an understanding of how they are going to achieve them. If businesses don’t have a target to aim for, their chance of success is far less.

“It’s fundamental to understand your margins, where your costs sit and your break even points.

“By understanding where your business is now, where it’s going and your cashflow needs, you can implement strategies, with the help of an accountant, to make sure the company has access to what they need, when they need it. 

“I urge businesses to take action now and not wait until it’s too late to look further down the track. Cashflow is extremely important for small businesses because it not only covers short-term debt, it provides greater negotiating power, new business opportunities and provides access to capital when needed.

“Another area in which businesses can prepare is by examining their margins. As the famous saying goes, ‘turnover is vanity and profit is sanity’ – it doesn’t matter how much you sell if you don’t make enough money to stay open.”

Steps to take

Jamie said a recession is as much a period of opportunity as it is a period for simply surviving for many businesses. 

He added: “The first few steps are all about reviewing, stripping away any necessary spending by asking what value that spend adds to the business and, if the answer is not positive, curtail it.

“The second area to review would be to look at processes, finding ways to streamline and improve can help create cost-saving solutions.

“Renegotiating contracts and shopping around will play a key role in saving business’ money.”

Keeping morale high

“If companies tackle these steps in the early days, it will stand them in good stead,” he added.

“You don’t need to feel alone in this storm, everyone is in the same boat. If you can make smarter decisions now when some players inevitably leave the market, you will be best placed to pick up their business.

“In adversity, you can find opportunity. I challenge businesses to be bold and brave and make changes before they become a necessity.”

For more information on Prime Accountants Group, which has offices in Birmingham, Solihull and Coventry, visit www.primeaccountants.co.uk or call 0121 711 2468. 

Pictured: Jamie Skelding, director and head of payroll tax at Prime Accountants Group.