How can your business navigate 2023?

As a business owner, you’re no stranger to uncertainty. But this can make planning for the year ahead challenging.

Predicting the future is impossible, but with deep analysis, you can make an educated guess about the obstacles that your business may face.

Know your numbers

Knowing your business’s current position is a great place to start.

Keep an eye on your management accounts to monitor your business’s performance and to assist with forecasting.

Useful markers include:

  • Your Trading Account – this tracks your sales, expenses, and gross profits, which gives insight into your profit margins.
  • Profit and Loss Account – get an insight into your business’s general performance by examining your earnings and costs over the year.
  • Balance Sheet – your balance sheet assesses the net worth of your business, which is your assets minus your liabilities.
  • Statement of Changes in Equity – this statement shows you what happens to your profits, in terms of whether they are kept in the business or paid out in dividends.
  • The Director Current Account – this allows you to check your personal expenditure from the business.

You must also be able to differentiate between profit and cash. A high profit doesn’t necessarily mean that your business is successful. Having a healthy cashflow is vital to keep your business running.

How can you scan the horizon?

Horizon scanning can indicate what’s in store for your business, but you must take a methodical approach.

To spot an upcoming change, you need to be able to define and measure it.

Take your annual revenue, for instance. You can’t predict your business’s financial position at the end of the year. But you can make an inference from the data that is currently available to you.

With the Bank of England’s base rate standing at 4 per cent and the resulting increase in the cost of borrowing, how will consumer spending be impacted?

Has your business been through a similar scenario before? What happened then?

This can give you some insight into what could happen, based on the information that you have right now.

Rather than just focusing on what you want to happen, you need to come to terms with the most probable outcome.

It is also important to not get consumed by one possibility and to have a realistic overview of what the year could entail.

Need advice on your management accounts and cashflow planning? Get in touch.

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