Budgeting for a Recession

As the Federal Reserve continues to increase rates, there has been significant debate on whether or not we’ll enter an economic recession. Historically, we don’t know we are in a recession until after it starts. When working on your forecast and 2023 budget it’s critical to think about what a slowdown could mean for your business. A fractional CFO can help you prepare and ensure your business plan is resilient in the face of a recession.

Understanding your business, its customers, and its suppliers is key to helping you create a plan for growth. When a recession is on the horizon or when your company is undergoing dynamic changes, budgeting and forecasting with multiple scenarios help you prepare during uncertain times.

Income Statement Projections

Your fractional CFO will assist you in evaluating key areas such as:

• Considering cost savings that may be made during a recession.
• Estimating the impact on your pipeline and how prospects will be affected by a slowdown. For example, you may need to adjust your pipeline probabilities and projected timing.
• Reviewing key trends in your industry’s labor market and how a recession may impact hiring.
• The impact of a recession on your existing customer base and what adjustments you must make to be ready.

Cash Forecasts

Managing cash is always a priority but it becomes mission critical in a recession.

• In a slowdown, receivables often take longer to collect. We can help you think through a proactive response to slowing payments.
• Lender relationships can also be reviewed in a period of tightening credit and increasing rates.
• Vendor relationships should be reviewed and closely managed to save on cash payments.

Given the increasing interest rate pressures, planning for 2023 may require multiple scenarios to prepare for a recession. Utilize your Outsourced Accounting Solutions team in implementing a diligent business plan to effectively tackle potential threats to your organization.