You don’t need us to tell you that recessions are complicated. Every corner of the economy feels the impact, whether that’s the biggest banks in the country or your local greengrocer. Recessions can take a devasting toll on international businesses too, with those lacking in preparedness often worst affected. To put it bluntly, recessions can be a matter of life and death for organisations across the globe. With the stakes so high, the question is: how do you effectively prepare for a recession? Let's find out.
What is a recession?
A recession is generally defined as a period of negative growth in a country's economy in two successive financial quarters. Understanding the exact reason why recessions happen is complicated, but all contain three leading causes:
Unsafe loans/credit lending practices can lead to widespread defaulting and unpaid debts.
Consumers and investors adopting overly cautious attitudes to spending.
Supply chain disruption that interrupts the flow of global capital.
Whether it be the Wall Street Crash of 1929, the 2007-2008 Financial Crisis or COVID-19 - recessions will continue to be a permanent fixture in global economics.
Who decides when a recession begins?
The National Bureau of Economic Research (NBER) is a non-profit organisation that monitors business cycles worldwide. They use academic, economic, and societal data to determine when a recession begins and ends. This is based on the review of 5 key indicators:
A decline in real GDP.
A decline in real income.
Rise in unemployment.
Stagnation of industrial production and retail sales.
A decline in consumer spending.
A significant decline in one of these areas can be enough to set the economic alarm bells ringing - however it takes a combination to trigger a recession.
Is a recession coming?
It's not a matter of if, but when a recession hits in 2023. All the warning signs are falling into place, and economies worldwide are facing yet another downturn. With the difficulties associated with COVID-19 still fresh in their memory, business owners will once again be looking for innovative ways to cut costs without impacting service levels.
Whether it be navigating volatile currency exchange fluctuations, unexpected supply chain issues, or reduced consumer spending, one thing's for sure: the show must go on. With no one-size-fits-all approach to navigating a recession, it can be challenging to know where to start. However, knowing that recessions are inevitable in the short and long term, setting yourself up for success should be a top priority.
How to prepare for a recession
No two recessions are the same, and it's impossible to predict how they will impact your business. However, that shouldn't discourage you from making carefully considered changes to your company's operations.
Here are some actions you can take to make the hit more manageable:
1. Don't panic and embrace the challenge
When talk of a recession begins, it's easy to think of the worst immediately. It's easy to understand why when everywhere you turn, all you hear is bad news. At 3S Money, we believe that opportunity exists if you're brave enough to take it. Challenging times are often the catalyst for ground-breaking innovation.
Many of the world's most successful businesses were formed during economic uncertainty. Airbnb, Uber, and even Disney used recessions as their inspiration to achieve the impossible.
2. Invest in the future, now
Recessions shouldn't put the brakes on innovation. In a competitive marketplace, investing in innovative solutions can be a saving grace in times of financial uncertainty. Always be alert to possible time and money-saving investments that may not seem the norm for your industry.
While lowering unnecessary outgoings is a crucial element of financial security, that shouldn't mean you stop investing in forward-looking solutions. Neobanks, alternative banks, challenger banks – you've probably seen a few terms used to describe these versatile newcomers. The truth is, no matter what you call them, Fintech continues to disrupt the banking landscape.
They've helped startups get their businesses off the ground, opened borders for established firms looking to go global, and spurred 100-year-old traditional banks to re-evaluate how they do things. But is alternative banking the right option for your business? Well, there's never been a better time to find out.
Whether you're at the start of your entrepreneurial journey or a seasoned professional – the future is now. It's easier to prepare for the future now than find yourself scrambling to catch up.
3. Get to know your cash flow
Whether a sole trader or a multinational corporation, every business should clearly understand its cash flow. This may seem like an obvious thing to say, but managing finances in an efficient way isn't easy.
We understand that busy entrepreneurs don't have the time to pour over every cent. However, adopting small changes can have a considerable impact. The biggest hurdle to overcome is having complete oversight of cash flow, especially for international businesses. Instead of managing multiple business accounts with different providers, would it not be easier to have them all in one place?
That's why 3S Money has gone one step further than simply offering another basic multi-currency business account – we've created a cross-border payments ecosystem. Our clients can manage 30+ local IBANs, access 65+ currencies, and send and receive payments in 190+ countries through a single dashboard.
4. Explore alternative finance options
During a recession, many small business owners see corporations taking on billions of dollars in debt, despite continuing to grow. There's no magic formula or agenda at play - they're simply spending money to make money. Entrepreneurs should be cautious about taking on more debt than they can handle. Fortunately, there are now alternative financing solutions available – including Trade finance.
Trade finance is an excellent option for companies that need support on their cash flow. A borrower, for example, may require a line of funds while waiting to be paid by their customers. A trade finance fund can offer that support and allow the business to continue trading and selling their products with the promise of payment.
This gives borrowers the confidence to grow their businesses without worrying about a lack of available funds. A repayment scheme is agreed upon between both financer and borrowers, allowing companies to instantly improve their transaction flow, inventory, and stock capabilities
3S Capital offers international trade financing solutions built for fast-growing businesses and startups looking to scale. With the 3S Capital uncommitted line of credit, your business benefits from the cash flow support and higher economies of scale and borrow between 0.5m and 10m in multiple currencies.
5. Create an online business account
Electronic Money Institutions (EMIs), such as 3S Money, are one of the most beneficial and innovative tools when recession-proofing your business' finances. Our simple, yet innovative, services include borderless accounts and banking solutions for global teams. With an emphasis on flexibility, security, and innovation, an online business account could cut those extra costs that add up when banking in more traditional forms.
As a bank challenger, we're breaking the mould to offer your business services that increase flexibility and reach while lowering costs. All of which are crucial when battling a recession. It is that simple. The digital payments revolution is well and truly underway and, if not embraced, could lead to additional challenges, and missed opportunities during a recession.
International business? We've got just what you're looking for. Electronic Money Institutions (EMIs), such as 3S Money, are one of the most beneficial and innovative tools when recession-proofing your business' finances. Our services provide innovative banking solutions designed for global teams, emphasising flexibility, security, and innovation. An online business account could cut those extra costs that add up when banking in more traditional forms.
As a bank challenger, we're breaking the mould to offer your business services that increase flexibility and reach while lowering costs – all of which are crucial when battling a recession. It's that simple. The digital payments revolution is well and truly underway and, if not embraced, could lead to additional challenges, and missed opportunities during a recession.
What are the advantages of a 3S Money International Business Account?
As an EMI, 3S Money is at the forefront of the digital banking revolution. Our goals and values are simple: fair and sustainable currency exchange that enables businesses to hold and manage multiple international business accounts in one place.
We're not interested in complicating things: our alternative banking services are simple, fuss-free, and beneficial in times of both financial certainty and uncertainty. Traditional banks have their place, but clearly, they aren't fulfilling the needs of businesses worldwide at a time of undeniable economic instability.
As mentioned above, the advantages that come with opening an online business account with 3S Money are as follows: flexibility, security, scalability, and cost-efficiency. By bringing these powerful benefits together, we provide a service that could make you rethink how your business operates.
Here are four ways 3S Money can help streamline your financial operations:
Having all business accounts in one place reduces the number of banking providers and their maintenance costs.
You'll avoid the high costs associated with traditional international bank transfers and benefit from the lowest foreign exchange (FX) rates.
Our experienced Client Managers are international payment experts, always on hand to advise and spot opportunities to help save money.
Remote account access is available for multiple global account users.
A complete view of all incoming and outgoing payments offers a 360° view of your global financial transactions.
What are you waiting for?
Don't sit back and wait to be confronted by the recession 2023 is bringing. Managing and even thriving in a recession is possible and can become a reality when businesses take specific steps to prepare. But it certainly isn't guaranteed.
Innovation, flexibility, and vigilance play their part in successful recession prepping, and, in our eyes, opening an online business account encapsulates all those values. Signing up with 3S Money is quick and simple: get started by checking your eligibility today.
We pride ourselves on providing a simple service without the jargon often associated with financial services. However, if you have any questions regarding our International Business Account or how 3S Money could help your business, don't hesitate to contact us - we'd love to hear from you.