Future ProofManagementStrategy

Navigating economic uncertainty: How a virtual finance director can help your business weather a recession

You may have heard the word recession used a lot lately, but are not sure what it means or how it affects your business. A recession is a period in which economic activity slows down. Usually, economists say we are in a recession when there are at least two consecutive quarters showing a decline in economic activity.

During this period, consumers may spend less and investing may drop. Businesses might cut back on hiring or even lay people off as their profits decrease. While it might make sense financially to cut back, doing so can be short-sighted. After all, recessions don’t last forever, and you need a plan to transition your business from recession to prosperity.

As a business owner, you face important challenges during a recession. How do you know which moves are good for your business? And how do you know what steps you should take to survive a recession?

That’s where a virtual finance director (also known as a virtual chief financial officer) can help you.

What is a virtual finance director?

A virtual finance director/chief financial officer (FD/CFO) specialises in managing the financial aspects of your business, but they do it on an outsourced basis. The person who fills it provides guidance and financial advice for your business based on their expertise.

Because they are outsourced, you aren’t responsible for paying a full salary or benefits–you simply pay for the services you need. This makes virtual FDs/CFOs accessible to small businesses who still need guidance but can’t afford the costs of an in-house FD/CFO.

Here’s how a virtual FD/CFO can help your company navigate a recession

Identifying and maximising cost savings opportunities

Often, business owners respond to a recession by eliminating jobs, delaying vital hires, and discounting prices. These tactics may seem smart because they cut costs and encourage consumers to buy, but they can severely hamper your ability to be successful long-term.

After all, your employees are your biggest asset–and having fewer employees means you have lower capacity.

A virtual FD/CFO can identify your options and determine which course of action will be most effective in the long-term for your business. For example, they may identify ways that you can restructure your business or staffing so you don’t have to lay people off but can still cut costs. That way, when the recession ends you won’t be scrambling to hire new employees to make up for those you laid off.

Assessing and managing financial risks

During recessions, business owners may be more likely to make emotional decisions, rather than decisions based on data. Emotions are much higher and entrepreneurs feel pressure to take quick, decisive action, but this action may not be in their best interest–and it may not even be effective.

A virtual FD/CFO will assess and manage your financial risks, showing you where you can make the most effective budget cuts based on your unique circumstances.

For example, they can show you ways to improve your processes to make the most of the cash flow you have available to you. They may identify opportunities in your supply chain to cut costs without risking the quality of your goods, or find weaknesses in your payment collection system that lead to unnecessary costs.

Identifying higher-profit revenue streams

In addition to assessing your financial risks, a virtual FD/CFO can help you by identifying which of your revenue streams are most profitable and therefore worth focusing on during a recession. This is helpful because your business will likely have limited resources, so you need to make thoughtful decisions about which revenue streams are worth continuing and which you should pull back on.

Helping to secure funding and investment to sustain your business

Just because there’s a recession going on doesn’t mean there’s no room for investment. There are still ways to secure funding for your business, and a virtual FD/CFO can help you find and secure them.

Final thoughts

When business owners are panicking about how to react to the recession, a virtual FD/CFO can provide much needed insight and level-headed guidance to counter that panic. They’ll show you how best to react to the recession in a way that protects your finances while still setting you up for growth.

A virtual FD/CFO will guide you with a plan that not only enables your business to withstand the recession, it anticipates future growth so you come out of the recession prepared to move forward.

Don’t let a recession derail your business plans. Contact me today to learn how my Warwickshire virtual financial director services help you assess and manage your finances and protect your business for the long-term.