The credit crunch, market turmoil and global recession—terms that are all too frequently heard today. Most experts agree that the UK will see a period of slower economic growth this year, if not a full-blown recession, which means businesses need to take firm control of their finances in order to weather the storm.

The latest report on Britain's economy from Ernst & Young's Item Club concludes that a rebalancing of the economy is taking place which will be good for the country in the long term. Consumers are cutting spending and the housing market is cooling. While this may sound like the beginning of a recession, the report predicts several interest-rate cuts to cushion the blow.

But this also means a slowdown for business growth and firms need to be prepared. Stuart Watson, a partner at Ernst & Young, says: "It's not looking awful but it's not booming either. We've had good economic conditions for a long time and now that's changing. It's time to revert to old-fashioned rigorous management."

It sounds like common sense, but not all companies make sure they are extra vigilant when it comes to managing their customers, suppliers and cash. As Watson says: "Businesses need to apply the sort of discipline now that probably wasn't so necessary a couple of months ago. Extra checks should be made on customers' credit records.

"If you spot people having difficulties with their finance and you're in a good financial position, you could use it to your advantage by offering them better credit terms in return for a higher price," he adds.

Also essential to avoiding any direct effects of the credit crunch is to keep your bank fully informed of your financial position. "This year, banks are not so likely to lend money on the same terms they have in the past. By keeping your bank up-to-date, you will earn their trust, which could work in your favour," says Watson.

Steve Pateman, chief executive of NatWest and RBS Business Banking agrees: "Great business ideas can flounder with poor financial management creating cashflow crises that shouldn't arise with proper planning. Early and regular dialogue with your bank can make a huge difference," he says. "Good businesses with good management will always be able to access competitively priced finance."

Jonathan Straight has been revising his plans for growth over the last few months as a direct result of the economic climate. He set up Straight in 1993, supplying recycling containers to local authorities and waste management companies.

The company is now listed on the Alternative Investment Market (AIM) and the share price has been slipping for a few months. He says: "We listed on AIM so we could acquire other businesses. With our value on paper reduced, we would have to borrow money to do that.

"The trouble is, there is not much money around to borrow at the moment which means we can't grow at the rate we wanted to."

But Straight doesn't see this as a problem. "Things will change eventually but now is the time to focus on our core business and make it stronger. We are prudent and it's important to be a bit more vigilant at the moment."

So the message from the experts to business this year is to get its house in order and keep tight control of the finances.

Watson advises: "Always have a Plan B for times when things aren't going as well as you expect. Don't wait for the economy to change, adapt your business to match the economy.

Are uk businesses equipped to cope?

Research reveals directors are not ready for a downturn

Research from the Society of Turnaround Professionals (STP) and GE Commercial Finance reveals that only four per cent of STP members believe that UK firms are well equipped to deal with a downturn in the economy. The three sectors most likely to be hit by a deterioration in the economy are the retail, leisure and hotel, and manufacturing industries, it says. Its advice? Firms should focus on improving their cashflow in order to increase their prospects of weathering any storm. They should also seek the advice of experienced managers and business advisers early on. Finally, they should focus on winning new business from customers less likely to be hit by a slowdown in demand.