4 Financial Moves Smart Companies Make Before a Downturn Hits

When a recession is on the horizon, most companies do one of two things: wait and hope… or react too late. The smartest companies? They plan while the market is still stable.
At Baker CFO Advisory, we help businesses build financial systems that don’t just withstand pressure — they create flexibility. If you’re trying to stay ahead of uncertainty, here are four moves we recommend making before the economy shifts.

1. Model 3 Versions of Your Cash Flow — Not Just One

A single cash flow forecast shows you one version of the future. But if you’re only planning for the expected, you’re unprepared for what’s next.

Smart companies model three versions:

• Baseline: your current expectations
• Slowdown: 20–30% drop in revenue
• Worst-case: minimal sales, delayed payments, increased costs
  
  

Why it matters:
Scenario planning turns surprise into strategy. You’ll see how long your cash will last, when to adjust spending, and how to protect your team and operations if things tighten.

2. Revisit Your Breakeven Point and Cost Structure

When revenue drops, knowing your breakeven point is key to staying in control.

Your breakeven point tells you:

• How much revenue you need to cover core expenses
• How deeply you actually need to cut (if at all)
• Whether your pricing, team size, or overhead is still aligned with your current reality
  
  

What to do:
Run a breakeven analysis and identify fixed vs. variable costs. The goal isn’t to cut blindly — it’s to trim smartly and preserve what drives results.

3. Secure Credit While Your Numbers Still Look Good

By the time most businesses apply for financing, it’s already too late.

Smart companies get ahead of it:

• They secure a line of credit while their balance sheet is healthy
• They build lender relationships before they need capital
• They keep clean financials, updated projections, and a narrative that reflects their plan — not just their past
  
  

Why this matters:
Access to capital in a downturn can mean the difference between laying off a team or doubling down on an opportunity.

4. Review Financial KPIs Monthly — Not Just Quarterly

​Downturns don’t show up in headlines — they show up in your numbers.

Three early-warning metrics to watch closely:

• Cash on hand / burn rate
• Gross margin
• Accounts receivable aging
  
  

What to do:
Set a monthly dashboard review. Give yourself real-time visibility — not just a report after the quarter’s over.

Final Thought

You don’t have to panic to prepare.

The strongest companies don’t wait for signs — they read their own numbers, plan ahead, and keep themselves in a position to act instead of react.

If you’re not sure where to start, we help businesses build recession-resilient systems that hold up under pressure — and give leadership better options in uncertain times.

Let’s build a financial strategy that works no matter what the market’s doing.
Visit bakercoadvisory.com to learn more.