How do we plan for the unpredictability that is a recurring feature of our business lives?
Brexit, COVID-19, and now the war in Ukraine, all conspire to create trading conditions that can best be described as chaotic.
Present challenges include increasing energy and commodity prices, both of which are forcing up the cost of living and inflation.
It used to be the case that we could create a business plan for the coming year and still be using the same numbers at the end of our trading year. Prices were stable, there were no disruptive supply-line issues and no coronavirus, at least, not the variety labelled COVID-19.
But times have changed and to survive and flourish in these new trading conditions we too will need to be adaptable.
One way to cope with unpredictability is to adopt a flexible planning approach. Instead of setting your budgets once a year, review them monthly or quarterly. In this way you can constantly see how changing the forecast numbers - to reflect new trading conditions - will affect your business in the coming year.
For example, if rising commodity prices increase your cost of production, you can consider your options to increase your prices before these changes start to exert downward pressure on your profits.
Flexing your budgets for changing costs will also provide you with the data to project forward the effects on cash flow and solvency.
We must all learn from the rising unpredictability of the past two and half years. The days of ‘steady as you go’ may be consigned to history. The new mantra will be to invest in planning for the unexpected.
If you would like to discuss the issues raised in this article and to see how flexible forecasting could empower your business in the coming year, please call.