It’s no secret that the economy has been on a rollercoaster the past few years, with inflation at an all-time high. And because of this, it looks like a recession is imminent. In fact, 89% of financial services CEOs agree that a recession is inevitable in the next 12 months.
Not only can a statistic like that strike fear in every working individual in the nation, but it can also strike fear in those who run small businesses—especially accounting firms. While there’s no guarantee you’ll come out of an impending recession completely unscathed, there are ways to prepare your firm to survive (and even thrive through) the wrath of a recession.
So, let’s talk about how you can recession-proof your modern accounting firm.
Invest in the right technology solutions
It may not seem like the best time to continue investing in the right applications to build your tech stack, but it’s actually the perfect time. During a recession, you need to be able to provide optimal service performance to your clients, and manual processes won’t allow you to do that. Not to mention, they’ll cost you more money…money that you’ll need to save.
Think about the processes you currently do manually (e.g., payroll, proposal creation, accounts receivable/payable, expense reimbursement, receipt management, reporting) and implement the tools to automate these processes. Doing so will save your team time and your firm money.
Focus on your firm’s assets
Now is the time to build meaningful relationships with your firm’s two most valuable assets: your clients and your staff. Focus on creating a solid firm culture—one that promotes a healthy work-life balance, has employees feeling engaged and supported in their work, and provides a space for honest and constructive feedback. The culture you create within your firm emanates from your staff to your clients.
When it comes to making it through a recession, your first thought may be to take on any client that walks in the door. Adding more clients equals more money, right? Wrong. Focus on your ideal clients—the ones you love to serve and are good at serving. Spend your time on the clients who consistently purchase services from you (and pay on time!), who adapt to your processes and technology, and who you love serving.
Your staff and your clients will be hit hard by a recession. And while the recession will eventually end, the relationships you create with them will last well beyond the economic downturn.
Provide high-value advisory services
Instead of relying solely on tax services to fuel your firm’s revenue, start offering client accounting advisory services (CAAS). Your clients will turn to their trusted advisors (i.e., you) and ask what services accounting firms offer to help navigate the choppy waters of a recession.
For example, cash flow forecasting is a high-value client accounting service that will be beneficial to small business owners. It helps clients predict cash shortages or surpluses, so they can see whether they’ll be able to pay common expenses like salaries, utilities and taxes, and where they can cut back unnecessary spending during lean times.
Offering high-value advisory services will not only benefit your clients, but they will also help fuel consistent revenue for your firm, which we’ll talk about next.
Increase year-round revenue
Creating consistent year-round revenue is extremely important for every small business on the brink of a recession. But for many accounting firms, tax season revenue is the big kahuna—the time of year that brings in the most money. Unfortunately, relying on tax season revenue to sustain a firm year-round is consistent with an outdated business model and won’t support a modern accounting firm.
That’s why you want to offer services that will supply year-round revenue, such as payroll, client accounting and tax, retirement plans or entity structure, just to name a few. And instead of looking for new clients to purchase these services, focus on upselling and cross-selling them to your existing (i.e., ideal) clients.
Start preparing your modern accounting firm
The idea of a looming recession is scary—so it’s imperative that you start recession-proofing your firm now. Don’t wait until a recession hits. Invest in the right applications (e.g., uncover the business intelligence you’ll need to recession-proof your firm with an app like Rootworks Insights), focus on your most valuable assets, offer high-value advisory services and solidify your year-round revenue to prepare your firm.
As Rubeus Hagrid (from the Harry Potter series) said, “What’s comin’ will come, an’ we’ll meet it when it does.”
If you take the time now to prepare for what’s coming, your modern accounting firm will be ready to meet it.