A mid June 2023 announcement that New Zealand is officially in a recession was not the news many small businesses wanted to hear. The fact that it could last for some months is another blow for businesses trying to get ‘back to normal’ after business disruption due to Covid-19, global supply shortages and extreme weather events. There is no doubt that the current economic landscape is unpredictable, so how can Kiwi small business owners develop resilient financial strategies to navigate events such as a recession? 

We believe that understanding your cash flow, when it fluctuates, and why it fluctuates, allows you to confidently create an accurate, and flexible cash flow forecast. A reliable cash flow forecast will allow you to make informed decisions about your business, and understand the financial stability of your operations.

Top tips to recession proof your cash flow forecast

1. Understand the importance of cash flow management

At a basic level, cash flow management is simply about making sure that you’re receiving enough income to pay your expenses. Timing is everything, so you’ll need to ensure that your invoices are paid on time so that you can pay your expenses when they’re due.

A cash flow forecast provides a reliable picture to anticipate income and expenses, over a specific period – a quarter, 6 months, or 12 months is typical. Understanding high income months, high expense times of the month, and seasonal fluctuations can provide you with a true reflection of the financial health of your business. For example, if you close down for a significant period over December and January, you may not make as much income as other times of the year, but may have fairly stable expenses. How will you make allowances for this?

Understanding the ebbs and flows of your business will help you to make informed decisions regarding your business operations, and sustain positive cash flow as much as possible during a recession.

2. Know your numbers

By looking at historical cash flow data, you’ll start to see patterns, trends and seasonal fluctuations specific to your business. Understanding historical data, or how your business income was impacted in previous slowdowns is also useful when making accurate predictions for the future. 

3. Review your contingency plan

All business owners should have contingency plans in place for recessions, natural disasters and emergency situations that are outside your control. If you don’t, a recession is a great prompt to get a contingency plan in place.

Essentially you need to identify potential risks and have strategies in place to mitigate them. In terms of revenue mitigation, consider how you can create new products or services, diversify your customer base or explore a new market. Understanding your Plan B, will allow you to respond quickly to an economic downturn or other unexpected situations. At the end of the day, you want to ensure your income and expenses are as stable as possible.

4. Managing your cash flow

Making sure your clients or customers pay on time is critical when cash flow is squeezed. A recession is a great time to review your payment terms, understand how you’re chasing slow payers or bad debtors, and whether your invoicing process makes payments as easy as possible. Improving liquidity is key, so it could be worth chatting to your suppliers about better deals or extending payment terms with them too.

5. Communication is key

Two way communication is crucial in a recession. Everyone can experience financial pressures throughout a recession, so talking to your clients about any changes to your business operations, payment term updates or delivery of products or services is helpful to maintain strong relationships. This can also help your clients pay in a more timely manner, your suppliers may choose to give you more favourable terms, and all parties benefit when you have healthy cash flow. 

Keep your staff informed of your business health too – your challenges and opportunities. They might also be worried about how the business is tracking and whether their jobs are secure.

6. Review your expenses

Unnecessary expenses are a drain on your profit and loss statement. This is a great time to review your operational processes and cut unnecessary spending. It’s also a great time to invest in more efficient tools and platforms that will save you money in the long term. Automating processes, renegotiating contracts and researching more cost effective alternatives can all help lift your bottom line, and free up much needed cash flow.

7. Seek external funding and support

Talk to the professional services you work with (accountant, lawyer, business advisors, Regional Business Partner Network) to understand if there are grants or funding you can tap into. You may have Research and Development that applies for a tax incentive, or get salary support to bring on an apprentice. You might be surprised how much support for businesses there is out there.

8. Have a positive cash flow mindset

By staying focused on your long term goals, and quickly adapting to market conditions, you’ll be well placed to ride out a recession. Recessionary environments often create opportunities as others in your industry choose to terminate trading, or the new market opportunities emerge. Be strategic in your planning, involve your team in decision making and focus on the future.

If you need more support, The Ministry of Business, Innovation and Employment provides a free support service for Aotearoa New Zealand businesses. If you need urgent support, you can speak to trained counselling professionals 24 hours a day, 7 days a week. Use these services if you need them, to make an impact on your business today.

Cash flow, late payments and bad debtors are key stressors for many businesses, even more so during a recession. Proactive planning, being flexible with your business planning and strategy and open communication with clients, suppliers and your team are key.


If you need to take immediate action to improve your small business cash flow, the IPromise app and its 100% secured customer payments, before the job begins, is a game changer. The reassurance that you’ll be paid immediately after the agreed job is completed can enable you to get on with doing the parts of the business you really enjoy. And who doesn’t want less admin

IPromise conveniently integrates with Xero accounts, automatically copying IPromise approved quotes/invoices into Xero to reduce your payment administration time by up to 80%.

Whether you work in Professional Services, Construction, Consulting, Manufacturing, or any other service-based industry, IPromise will add payment security, improve cash flow, reduce administration time and enable open, easy communication for your projects.