Economic uncertainty tends to force businesses into a more disciplined way of operating. During periods of recession or slowdown, strong organizations do not simply react to pressure as it comes. They take a step back, assess risk clearly, and make deliberate decisions that protect liquidity, preserve flexibility, and position the business to emerge stronger on the other side.
At Greenwood Ohlund, we often advise clients that recession planning is not just about cutting costs. It is about understanding what truly drives the health of the business and making informed decisions early, before options become limited. Below are five practical steps businesses should consider during a recession.
1. Tighten visibility around cash flow
Cash flow should become a central management focus during a recession. Even profitable businesses can run into difficulty if cash receipts slow, margins tighten, or working capital needs increase unexpectedly.
Leadership teams should move beyond relying solely on historical financial statements and instead use short-term and medium-term cash forecasting to understand what is ahead. A rolling 13-week cash flow forecast is often one of the most useful tools during uncertain periods. It allows management to identify pressure points early, model downside scenarios, and make more informed operational decisions.
This is also the time to closely monitor accounts receivable collections, payment timing, inventory levels, and any nonessential cash outflows. Businesses that maintain a strong grip on cash tend to have far more options than those that wait until liquidity becomes a problem.
2. Reevaluate cost structure, but do it strategically
Many businesses respond to recessionary pressure by immediately cutting expenses across the board. While cost discipline is important, broad reductions without strategy can create long-term damage.
A more thoughtful approach is to separate costs into categories: essential, variable, discretionary, and growth-oriented. From there, leadership can determine which expenditures truly support core operations and which ones can be reduced, delayed, or eliminated.
This is also a good time to revisit vendor contracts, staffing models, facility costs, software subscriptions, and outsourced service arrangements. In some cases, a recession creates an opportunity to redesign operations in a more efficient and scalable way rather than simply shrinking them.
The key is to preserve the parts of the business that drive long-term value while reducing spend that no longer aligns with current priorities.
3. Stress test revenue assumptions
In a recession, revenue forecasts often become less predictable. Customer demand may shift, sales cycles may lengthen, pricing pressure may increase, and clients may delay projects or reduce scope.
Businesses should revisit their budget assumptions and ask difficult but necessary questions. What happens if revenue declines by 10 percent, 20 percent, or more? Which products, services, or customer segments are most vulnerable? Which relationships are most stable? Where are margins most exposed?
Scenario planning can help management avoid being overly optimistic and instead prepare for a range of outcomes. It also helps identify which levers can be pulled if conditions worsen. Organizations that understand their revenue concentrations and margin sensitivities are better equipped to respond with confidence instead of reacting in real time.
4. Strengthen communication with lenders, investors, and key stakeholders
One of the most common mistakes businesses make during difficult periods is waiting too long to communicate. Whether the audience is a bank, investor group, board, or ownership team, transparency and timely communication matter.
If a business has debt, it is important to understand covenant requirements, available borrowing capacity, renewal timelines, and any potential compliance issues well before they become urgent. Lenders generally respond better when management communicates early, demonstrates command of the numbers, and presents a realistic plan.
The same is true internally. Boards and ownership groups should have a clear understanding of current performance, risks, and management’s response plan. In uncertain environments, credibility matters. Strong reporting and proactive communication can preserve trust and create flexibility when the business needs it most.
5. Focus on resilience, not just survival
A recession is not only a period of risk. It can also be a period where disciplined businesses separate themselves from the market.
This may mean protecting key talent, investing selectively in high-performing business lines, improving systems and reporting, or refining strategy while competitors are distracted. Some organizations use downturns to strengthen customer relationships, improve pricing discipline, or pursue targeted acquisitions and market opportunities.
The businesses that navigate recessions most effectively are often the ones that combine caution with clarity. They manage downside risk, but they also keep sight of the long term. The objective is not simply to survive the next few quarters. It is to build a stronger and more sustainable business.
Final thoughts
Every recession is different, but the underlying principles tend to remain the same: know your cash position, understand your cost structure, challenge your revenue assumptions, communicate early, and make decisions that support long-term resilience.
For many businesses, the hardest part is not identifying the right questions. It is having timely financial information and a clear framework for decision-making. That is where strong accounting, finance, and advisory support can make a meaningful difference.
At Greenwood Ohlund, we work with organizations to improve financial visibility, strengthen planning, and support thoughtful decision-making during both stable and uncertain periods.
Jason Mallon, CAS Partner
