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Business

What should companies do against a recession?

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Running a business is always difficult, but in such volatile times it has become even more difficult. On the one hand it is necessary to adapt the company to high inflation, on the other hand it is necessary to prepare for the danger of approaching the recession.

For nearly 30 years until 2001, while Turkey was experiencing high inflation, companies had learned to operate in this environment. So we have an inflation experiment. Indeed, companies had to learn to operate in a low-inflation environment as inflation fell rapidly thanks to the strong disinflation program introduced in 2001. In recent months, the old books on inflation have begun to be taken out of the polls again. . But there is also a recessionary situation.

Our companies have actually faced a recession several times in the recent past. So they know exactly what to do. What we usually experience is a type V recession. In other words, the economy can exit as soon as it enters a recession. Businesses can also experiment with a V-type process. However, this time it is different from the previous ones. Now on the horizon are both high inflation and recession. In other words, we are faced with a vision that leads to stagflation in the shadow of the supply and procurement problems of raw materials due to the pandemic, the war and sanctions against Russia.

Companies that manage these periods well can get out of the process by strengthening and increasing their market share. The power of companies that are familiar with crisis management emerges in crises. So what should companies do against the impending recession or stagflation?

– Preparation of business plans and budgets 2023 has begun. Accurate and prudent assumptions must be included in the budget and plans to be made. It is good to be prepared for a new currency volatility. Note that there will be a transition from inflation prices to recessionary prices.

– I heard a very veteran businessman on the eve of a crisis. “There are a few years; years of snow. There are a few years; have been years. We are now in the year ar, so it is time to protect our honor. “In a sense, times are strong cash times. Cash management is important because companies fail because they cannot manage cash, not due of balance sheet losses. The history of crises is full of stories of companies failing to manage cash flow. Positive cash flow should not be overlooked in such periods. Minimization and good management of working capital requirements, including all costs, are very critical.Effective inventory management should be carried out; Credits should be well managed.

– Savings and cost is the first way that comes to mind in crises. Of course, cost is at the heart of the business, but cost control should be done before the crisis, not hastily. It is not right to close quickly in the midst of the crisis and give up many things. Quickly closing a recession with a very rigid position does not work. Controlling costs is not the same as cutting all kinds of costs. It should not be forgotten that some expenses that bring growth must continue. The cost structure should be revised before it goes into recession. Some plans should be postponed if necessary. The equity structure should be strong. Remember the companies that emerged strongest from the crisis. These are companies with strong equity structures and high adaptability.

– In a recession, some companies start by reducing the number of employees they consider to be the biggest cost item. It’s wrong. These workers will still be needed as we emerge from the V-shaped crisis.

– I scrambled my old notes. Once again, a major industrialist I spoke to in the midst of a crisis said: “Our strength emerges in crises because we manage them well. We have always emerged from the crisis by growing up ”. He said. Describing what he did, he said, “We finance, protect and give additional terms to our customers. We welcome debt collection,” he said. Don’t shy away from customers or suppliers. There are many examples of companies that have struggled after coming out of the crisis because they have offended their customers and suppliers during the crisis. It is important to be on the side of the customers during a recession; in the same way it is necessary not to break ties with suppliers. It is essential to maintain a healthy dealer and distribution structure. It is possible to get out of the crisis stronger; as long as your reseller and customer network survives; Don’t break ties with suppliers. Collecting credits is important. It is necessary to follow the credits very well and to speed up the receipts. But while doing this, you need to carefully approach customers and resellers and support those in need.

– Must not give up previously announced sustainability goals and gains in the name of cost control. These goals are the strongest link between the company and the company, its employees and the rising generation Z. It is not easy to go back to the same place once you are back.

-Having a strong automation system helps you survive times of recession and crisis. As artificial intelligence and intelligent systems have spread, it has become easier to control costs.

– When well managed, periods of recession are also good times to buy. For this, cash power comes to the fore.

Consequentially;

Recessions are difficult times. Especially if there is both a recession and high inflation, it becomes more difficult to manage the process, it requires separate mastery. In such times it becomes even more important to manage stocks, credits and debts and control costs. However, when managing these processes, it is necessary to protect employees and help customers and suppliers to survive. But the first step is to do good recession planning. If there are inefficiencies in terms of costs, equity and organization, it is useful to resolve them before entering into crisis.

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