This year has been tough on small businesses, with a raft of employment legislation sent down from the government combined with the slowdown in the economy. Talk of doom and gloom has become commonplace, but the more flexible you are, the more likely it is you will come through the downturn stronger and better. The following top five tips should help you survive the slowdown and make your business stronger:

Cut through the red tape
In a recent survey, nine out of 10 small businesses claimed that red tape was preventing them from doing business. Indeed, the cost of red tape to British business last year was over £10bn according to the British Chamber of Commerce. In an economic slowdown, where cash is tight, an employee claim against your business could be fatal.

While a payroll software system can go some way to relieving the pressure by keeping you compliant with payroll legislation, it alone will not help with health and safety or employment law issues. Every small business needs solid, plain English legal advice before something happens, not afterwards

Get the right systems in place
The cost of payroll errors can be extremely damaging and now is not the time to let payroll accuracy slip. It can be damaging to employee morale, and will hit you in the pocket. Equally, a good payroll software system will allow you to file your tax returns electronically, and HMRC will give you a £75 rebate for doing so. From April next year, e-filing will become mandatory, so you must have this system in place.

For the slightly larger small firm, an additional HR system might not be the ‘sexiest' software application in the world, but can help you improve efficiency by automating certain processes that take up too much of your time. This is as much about improving your own productivity as much as that of your employees. Streamlining your processes now, in an economic downturn, will put your business in good shape for when the economy picks up again

Maintain staff morale
A downturn is not just worrying for you: it's worrying for your employees. Maintaining morale does not have to mean taking them out to a restaurant or lavishing gifts upon them; these are stopgap solutions with little long-term effect. An employee assistance programme can prove to be a wise investment, raising productivity through improved morale and improved health.

Developing your workforce throughout this period is crucial, not necessarily by spending excessively on training, but you can hold ‘knowledge share' sessions to allow staff teach each other new skills. In recent research, a surprising eight in 10 business leaders said that they would confront the economic slowdown by diversifying and up-skilling their employees

Be flexible to keep costs down
If you're thinking of the worst and you have to let people go, then prepare thoroughly. Get help if you need it and don't break the rules. As before, if you break the rules, a claim against your company will really hurt in a downturn.

Outsourcing certain functions gives you further flexibility to adapt and reduce your expenditure. It also gives you access to best practice, which is of particular use if indeed you are looking to trim down your staff.

Another way of reducing costs is by cutting down on employment agency spend. Online recruitment systems have grown in popularity over the last year, with the ability to monitor and measure the success of recruitment streams and to take advantage of your company's website with an in-built career site

Plan now before it's too late
Only a third of business leaders, according to research, have implemented plans to ‘weather the storm', meaning that two-thirds of businesses are not ready for an economic downturn.

Whether this means cutting down on staff, reducing expenditure or investing to save, or indeed all three, the time to do this is now and you'll emerge from this difficult period stronger, leaner and more competitive than before. Now who said that an economic downturn is a negative thing?