Even if a recession has not been formally declared, are we really in one or is a recession coming in 2023? Even as I am writing this, experts are constantly discussing the pros and cons. Is their resolution determined by the high prices of goods and services, and/or the laying off of employees by mega corporations, including Amazon, Meta, Twitter, and Zillow?
A recession can be defined as a sustained period of weak or negative growth in real gross domestic product (GDP) that is accompanied by a significant rise in unemployment rate. This ultimately results in an increase in the price of goods and services. In a recession, consumer spending drops, leading to a reduction in economic activity— buying and selling. The government may have to intervene through various measures—for example, to cut interest rates—to support the economy.
What does this mean for your firm and your clients' businesses? It's anyone's guess, but the number one thing you can do for your firm is put together a survival plan to make sure you can ride out this storm—and remain formidable when the skies clear.
Of course, you can take a deep look at your financial statement, and take an in-depth analysis or evaluation of your financial position, but you should always start with the first line item on almost every performance or tax-related form we fill: Income. Let's look at some questions and topics, and several other factors you may not have thought of for this process.
Income sources
- Are we able to sustain the current income level?
- How can income be increased?
- Diversify your services by offering new services to current clients and expand your client base. Opt for services, such as payroll, that provide a recurring revenue profit stream. QuickBooks® Online Payroll offers auto payroll, which automatically processes payroll, pays the tax, and files the return.
- Accounts payable/receivable: These services are easier to offer today with the availability of apps, including Melio and Bill, which easily capture bills, have an approval workflow, integrate with QuickBooks Online, and have various payment options. Gone are the days of running a stack of checks and waiting for the controller to sign them. When accountants offer this service, they help to maintain a healthy cashflow in their clients’ businesses. Healthy cash flow is the oxygen of any business and our clients will love us for this!
- Consulting services: Simply put, you need to offer advisory services. A good one would be to help our clients design efficient workflows and use apps in every possible area of their business. This would eliminate redundancies to save time and reduce reliance on manual labor, especially when it's hard to find good employees. Other advice you can offer, for example, is to help your clients become a paperless (or less paper) business. Our work as accountants would be much easier if our clients embrace technology to work more efficiently and save time.
- Referrals: Our clients are the cheapest advertisement we have. Ask them for quality leads and be sure to thank them, even if the lead does not become a sale.
Pricing
Considering the increasing cost of goods and services, this is a good time to review and evaluate your pricing and price model. Do you need to adjust or create a hybrid price model? You may employ hourly, fixed value-based pricing, or a combination depending on the engagement.
Budgets
Prepare a budget for the firm, stick to it, and allow flexibility for only absolutely necessary changes. Budgets can truly help us stay on track and indicate the degree of any variation. This should be pointers to us to get back on track. It is easier to be on track when we can measure the deviation from projected/expected results.
Reduce costs
Small businesses are reducing cost to contain the adverse effects of inflation and recession. Ways to reduce costs include the following:
- Eliminating unnecessary expenses, including multiple subscriptions to associations offering overlapping services, health clubs we to to once a week, magazines we never read and trash monthly, and cable stations that are seldom watched.
- Renegotiate various leases on equipment, rent, and other service contracts.
- Review rates or merchant fees for credit card processing.
- Reduce meals and entertainment, or find alternatives that are less expensive and still enjoyable.
- Review utility bills and telephone contracts, and shop for cheaper alternatives with more offerings. The competition is stiff out there, so this is a great time to shop around.
Overhaul the system
Old systems are harder to work and more expensive to maintain. Take a look at your workflow. If you don’t have one, document your processes using a flowchart. Assess your methods and the resources used. You might be surprised at how much time can be saved when new and efficient processes are put in place. Embrace technology and use the freed-up capacity to have a better work-life balance or generate more income.
Network/partnerships
Successful firms grow their revenue by partnering with other businesses that offer complementary services. Insurance companies, financial planners, legal practices, and involvement in local business chamber activities might bring about business with a long-term engagement and profits.
Secure/affirm client loyalty
Having a loyal client base is essential for a thriving accounting practice, and the accountant-client relationship is more important than ever in troubled times.
During the pandemic, business owners were in desperate need of business advisors—not just accountants. They had several questions and needed advice to chart new territory. As a result, many accountants became business advisors, helping their clients obtain tax relief from the government, and giving them suggestions and ideas to survive the pandemic. We can only imagine how many more businesses would have been lost if we did not rise to the occasion.
Clients are in need and can use our help again! Reach out to them, schedule meetings, review their goals, and assess if businesses are on the right path to achieving those goals. Send out newsletters about current economic conditions and how to stay in business. Ask them about their biggest concern and help them come up with a solution.
Survive for 2023
With this level of interest and involvement, reducing or eliminating professional fees will be far from our clients’ mind. We get to stay in business only if we can help our clients stay in business. The result? Happy clients and a steady income stream for all of us!
