How will the coming economic slowdown affect us?

I am not an economist and as the hotel commercial says, “I didn’t stay at a Holiday Inn Express” either! With that disclaimer out of the way, more and more evidence of an economic slowdown is creeping into conversations these last few months. Bankers, economists, business media and business executives are beginning to consider that the economy is nearing the top of the cycle. While this isn’t “new news” (see my article from March, 2018 Nearing The Top Of The Economic Cycle), it does seem to take on new meaning recently.

Since last October, I have seen interest in protecting cash flow and receivables increasing significantly. In fact, I’ve quoted 3 times as many businesses than usual over the fall and winter.

To be sure, we’re not there yet and there are mixed signs of economic strength and weakness but for the first time in years, concern over the end of the expansion is showing up.

Evidence

From articles, surveys and white papers, to economic statistics; there is plenty of evidence that the economy is nearing the end of the expansionary cycle. Here’s a very short list I found from earlier this year:

Treasury Yields ‘Invert’ in Possible Recession Sign, CFO Magazine

Will The US Earnings Recession Result In an Economic Recession? Here Is Goldman’s Answer, Zero Hedge.com

Banker Confidence Levels Are Slipping, CFO Magazine

Record Defaults by Chinese Companies: Fake “Cash” & Fake Accounting, Wolf Street

Fed hold line on rates, says no more hikes ahead this year, CNBC

Fed Resists Pressure for Interest Rate Cut, CFO Magazine

Even here in “It City”, Nashville is showing small signs of a slowdown, although it’s clearly still growing, just not as fast as before.

We could spend all day curating articles about the economy but clearly, through the noise of the news cycle, there is concern that a slowdown is coming. The question becomes, what should a business owner or financial manager do now?

How to prepare?

If a rain storm is coming, it’s a good idea to look for an umbrella. The same idea applies to a business. Recently, Forbes wrote about basic steps every business should take to prepare for recession. Several involve managing receivables and cash flow more closely. I would add a few ideas of my own to their list.

1. A slowdown will cause some businesses to default on payments, particularly those who are highly leveraged.
2. Bad debt will mean using up line availability or squeezing profits or injecting capital to replace lost money.
3. Consider 2009 and think about what you can do to protect your business. What would you do differently now having been through “then”?W

Protect cash flow and the balance balance sheet by looking at creditworthiness of customers and prospects (even key suppliers!). Then, monitor for problems and take proactive action.

I can help!

To learn how to protect your business from the coming economic slowdown, visit tateparker.com or email me at: tate@tateparker.com. Get an “umbrella” for your cash flow before the rain starts.