How to prepare your Finances against Economic Slowdowns in 2023?
The possibility of an economic slowdown is one of the worst fears that can unsettle entrepreneurs across the world. As a leading accounting firms in Dubai, we can confirm that the majority of small business owners lack a solid strategy to prepare for economic downturns that can strike their business at any time. Whether it is inflation, rising interest rates or global events that may disrupt your supply chain (remember the pandemic?), you need to prepare your finances proactively. So, let us see what you can do to prepare your finances for an economic slowdown:
Understand the impact on clients and suppliers
During uncertain times, it is crucial for you to consider the requirements of your clients and partners to heart. This is not as complicated as you may imagine. You can do this by making a phone call to your most important clients. Such talks will help you understand how the market for your goods or services is changing and what actions you must take. Additionally, you need to find answers to these vital questions:
- Are your customers changing or cutting down orders?
- Is there a need to explore new markets?
- Is there a risk to your suppliers in a way that might affect your purchases?
Review your production plan and focus on efficiency
The conversations with your clients and suppliers can also lead you to review your production plan. It will help you ensure the goods or services you produce will land a buyer on the market. You should also take care to maximise output while curbing unnecessary expenses. You should also evaluate your company’s performance against internal goals or benchmarks, such as industry averages. Business owners can improve their results by minimising delays, improving quality and reducing other forms of waste. You can consult with accounting firms in Dubai for measuring your business performance based on key financial metrics.
Get your financial processes up to speed
During economic downturns, entrepreneurs need to have a clear grasp of the performance of their business at any given time. This understanding should not be derived out of guesswork or a gut feeling. It is important to have real data and a process to understand how the results fluctuate over time so that you can monitor your firm’s financial performance and potential problems to address. Avail of accounting services in Dubai to provide you with solid financial data.
Measure your current financial health
While dealing with uncertainty, you must know where you are starting from. It means business owners need to measure their company’s financial health. You can use the four ratios of Liquidity, Profitability, Productivity and Operating Efficiency to measure your company’s financial health. Teaming up with the best accounting companies in Dubai is the easiest way to measure your entity’s financial health.
Ensure the quality of financial data
Companies are advised to do proper accounting & bookkeeping for various requirements such as VAT and corporate tax. While collecting the basic financial information, you need to ensure you are gathering relevant and reliable information at the source when needed. The data you gather will be not only used to prepare your financial statements but also to review your progress to reach your financial objectives. Entrepreneurs should also ensure they are using an accounting system that is properly set up. Accounting firms in Dubai can help you to set up a robust accounting system in your organisation.
Create a budget and financial projections
In the next step, you can use the data you collected to create a forecast. Preparing a comprehensive annual budget is a core element of robust financial management practices. The budget will be comprehensive only if it includes an income statement, a cash flow statement and a balance sheet. Most importantly, all three statements have to be interconnected.
This is important for the business as your projections are forecasts of future income, cash flows and financial position. Such forecasts can act as an early warning system that helps you to prepare for cash flow dips, potential reductions in investments or operating costs.
Accounting Firms in Dubai can help you
You have just gone through some of the key actions you must take as soon as you feel the economic winds are turning. You may require the assistance of accounting firms in Dubai such as Jitendra Chartered Accountants (JCA) to properly execute each of these actions. JCA has a team of highly qualified Chartered Accountants in the UAE who can assist business owners to fulfil their accounting requirements such as maintaining financial records, preparing for UAE corporate tax, VAT registration, VAT return filing, ESR< AML, UBO etc. By availing of JCA’s robust accounting services in Dubai, entrepreneurs can achieve their business goals with peace of mind.