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  • Writer's pictureAmi Kassar

AmiSight 7/1: Preparing Your Balance Sheet for a Potential Recession

I am often asked to talk about my economic predictions for what's ahead. My answer is the same as it always has been: if I knew I would be sleeping on the beach somewhere!! What I can say, though, is that all the uncertainty should not be a surprise. We are living through Covid economic dominoes. There is no precedent for this in history, and it’s going to take a long time for the world to find a time to find a new normal.

That being said – there are always (in my opinion) two key things a business can and should do to prepare for a potential economic downturn. Number one: make sure your line of credit is as large as possible. The second rule is to structure your debt with the lowest monthly payments to give you the greatest flexibility.

Remember that running a business is like coaching a football team. You don't win in football without good offense and defense. So your balance sheet should be structured to allow you to play both as needed!!

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Tim Tolan
Tim Tolan
01 août 2022

So Ami - what is a good rule of thumb in having sufficient cash reserves for a small business (say less that $5M)? I’ve always read that 6 months of cash on hand is a good target but that’s in normal economic times. Does that change given the current economic climate?

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