The UK economy is “stuck on a low-growth treadmill”, according to the British Chambers of Commerce. This follows a modest GDP rise of only 0.2% in early 2024. With 22% of British businesses reporting decreased turnover, and more recent figures showing only slight improvements, it’s clear that startups and small to medium enterprises (SMEs) are facing challenging times in this sluggish climate.
That’s what makes effective budgeting and forecasting so essential in order to sustain and grow your business. Fortunately, we have some tips…
1. Make every penny count
The slow growth rate means your business must be more strategic with its financial planning. This means considering each individual department and how it impacts your bottom line – ensuring that every expense is justified and contributes to measurable returns.
2. Create a financial cushion
One of the most critical aspects of managing a business during a low-growth period is maintaining a strong cash flow. Aim to have enough money in the bank to cover at least three months of overheads. This cushion helps you weather unforeseen downturns, giving you some welcome breathing room in your financial strategy. Keeping an eye on your cash flow also enables you to respond quickly to any discrepancies or unexpected expenses.
Using tools like KashFlow, QuickBooks and Xero can significantly enhance your financial management. They provide you with real-time financial data, helping you track income, expenses and cash flow with precision. This enables you to make informed decisions based on current information rather than relying on outdated figures or projections.
3. Keep your forecasts fresh
Forecasting is not just a one-time exercise. It’s a continuous process. In a low-growth environment especially, it’s important to assess and reassess your assumptions about pricing, sales volumes, and seasonal patterns. Do these predictions still apply? By regularly updating your forecasts, you can better anticipate potential challenges and adjust your strategies accordingly.
When you keep on top of forecasting, you’re able to identify trends early and implement necessary changes before minor issues become major problems. This iterative approach not only aids in maintaining financial stability, but it also supports decision-making across the board.
4. Be wary of cost-cutting
While it may be tempting to drastically cut costs in a low-growth cycle, these measures can sometimes prove counterproductive. Instead, focus only on making strategic investments that drive tangible results. Investing in these areas can help you drive growth and enhance your competitive edge, positioning your business for long-term success as opposed to short-term survival.
The value of partnering with an expert
Managing your own budgets and forecasts is key to running a business, but that doesn’t mean you can’t turn to the experts for help. Partnering with an experienced accountant like Nabarro Poole can bring a wealth of benefits; our team has valuable insights and expertise in financial planning, equipping you to navigate complex economic conditions.
We can assist with accurate forecasting, optimising your budgeting processes, and guaranteeing compliance with changing financial responsibilities. Why not embrace this current low-growth cycle as an opportunity to refine your accounting strategy? Reach out to us to get started.
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