As many businesses are still recovering from the pandemic, inflation continues to rise. This situation is causing many businesses to wonder if we are headed for a recession and how best to survive an economic downturn. “During any kind of economic downturn, it is important for businesses to track finances closely and be able to make informed and strategic business decisions that will help the business survive and thrive,” explains Greg J. Menia, CPA and founder of Accurate Tax & Bookkeeping Services. “That’s why bookkeeping services are so important.”
What is a Recession?
A recession is defined as “A significant, widespread, and prolonged downturn in economic activity.” But, that is not an “official” definition as many things contribute to a recession which is why current economists often do not agree on whether the current downturn is or is not a recession. While most economists agree that currently, the U.S. is not in a recession, that does not mean businesses are out of the woods as inflation continues to rise.
Why are SMEs So Impacted by Economic Downturns?
Before understanding how bookkeeping can help businesses survive in a challenged economy, it is important to understand why they are so impacted.
During any economic crisis, increased overhead forces higher prices on goods and services. With that, demand and profits decline. In turn, this can quickly cause problems for a business that does not have large cash reserves.
Can Bookkeeping Services Help Small Businesses Survive a Recession?
Even if it is not a recession, any economic downturn can significantly and negatively impact a small business if the owner is not paying attention to the right things. Bookkeeping services help do just that. With the help of professional bookkeeping, a business can stay agile enough to survive and even thrive, no matter the economic climate. Here’s how:
A bookkeeping service provides an income statement. This is a valuable tool that provides profitability metrics over a period of time. This includes information regarding the following:
Revenue is how much money comes into a business. Understanding revenue metrics can help a business make the most of sales cycles and target sales efforts more effectively. This is especially important during a recession when revenue drivers may change.
A bookkeeper can also help small and medium businesses track fixed and variable expenses. Fixed expenses are the recurring costs of operating a business, such as rent, utilities, and insurance. Though nearly so, the actual cost of these is not necessarily “fixed,” only the need to pay them in order to keep the business running. Variable expenses include things such as labor and materials. Professional bookkeeping services can help a business make educated decisions about where to cut expenses to manage other areas of expenditures.
Tracking profit allows the business owner to make adjustments to increase profit margins. A profit margin is the difference between the money generated from a sale and the cost of fulfilling the sale. If the cost of fulfilling a sale is too high, the profit margin will be low. Bookkeeping services can help identify this problem before it causes businesses to suffer losses.
A professional bookkeeping service can help any business gain a clear picture of where their money is going and make critical changes in real time. This provides the business with a critical advantage no matter the economic climate.
Accurate Tax & Bookkeeping Services Brandon FL
Accurate Tax & Bookkeeping Services, LLC (ATBS) is a full-service tax, accounting, and consulting firm offering services to businesses and individuals throughout the Tampa Bay area. For more information about bookkeeping or other services, call (813) 655-9702.
Accurate Tax & Bookkeeping Services
710 Oakfield Dr.
Brandon, FL 33511