Surviving the economic downturn

It comes as no surprise that since New Zealand entered an official recession in December 2023,

individuals and businesses have been forced to take steps to cut costs to survive the impact. Having

not experienced a recession since March 2008, many New Zealanders might not remember the 18-

month downturn that finally came to an end in June 2009. However, one key lesson is that

recessions eventually end, and businesses need to adapt to market conditions to survive. So, what

strategies can business owners use to ride this wave?

The most obvious but simplistic way to cut costs is to create a budget and stick to it. Although easier

said than done, creating a monthly budget and reconciling at month end against actual costs is a

good way to create discipline with money coming in and going out. This form of reporting should

mitigate cash from disappearing through unnecessary expenditure. Key management personnel must

closely monitor and control all types of expenditures, including minor ones like coffee deliveries and

office supplies, as these can accumulate and impact overall costs. Adhering to a budget and

implementing cost-cutting measures are essential, especially when income slows. Maintaining a

steady cash flow is equally important, therefore, it's vital to ensure debtor payments are consistently

collected and to actively chase late payments.

Additional strategies include enhancing customer relationships and prioritising retention while

streamlining operations and leveraging technology to create more efficient practices to decrease

costs and target a wider audience. Maintaining financial flexibility, involving employees in cost-saving

measures, and utilising targeted marketing and sales incentives are also crucial. Scenario planning

can provide further stability and resilience during economic downturns. By balancing cash inflows

and outflows and emphasising both cost reduction and income maintenance alongside business

development, businesses can achieve financial stability and long-term success in an uncertain

economic climate.

The economic downturn has not only affected business owners but also influenced Government

spending, creating ripple effects. The Government has cut spending on consultants, impacting large

accounting and professional firms, leading to redundancies, decreased entertainment spending, and

fewer future employment opportunities, including intern and graduate spaces. This further

emphasises the interconnectedness of different sectors and the need for comprehensive strategies to

navigate the challenges of a recession.

A recession can affect all sectors, from Government spending to large firms' employment and small

businesses' cash flows. Consequently, these can negatively impact one another, underscoring the

need to implement strategies to navigate these times together. To ensure resilience, businesses

need to adapt, innovate, and collaborate, leveraging all available resources and support systems. By

doing so, you can weather the storm and emerge stronger on the other side. All going well, as you

emerge out the other side the challenges can become opportunities for growth and innovation.

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