Maintaining growth in turbulent times

Businesses naturally focus on growth and winning new business. Budgets and forecasts have always been an important part of business planning, yet in periods of uncertainty a different mindset is needed. Scenario planning is the key. 

The economic picture remains far from certain with rising inflation and interest rates, continued challenges to global supply chains, prolonged conflict in Ukraine and a cost-of-living crisis that will affect us all.  

Whilst political direction may have recently been lacking, businesses should stay on the front foot to ensure they understand and are prepared for different potential economic pictures if they are to continue to thrive. 

Working capital management is critical

Businesses, even those with strong growth trajectories, may be carrying lower reserves, less cash and more debt. Working capital is the lifeblood of growth. Growth generally requires more working capital, and with rapid growth working capital management becomes critical. Businesses need to understand any shortfalls, where the pinch points might be and take steps to secure funding through those tight periods. 

Together with longer working capital cycles, businesses are also facing rising costs as demand for people and products outstrips supply leading to overall cost push inflation.  

Inflation can only really be managed by interest rates and it is widely accepted that the current inflationary pressures are global rather than local. UK interest rates are rising to levels not seen in 30 years and longer, with a weaker Sterling the result. 

Assessing risks and scenario planning

Businesses should assess which risks are likely to impact them the most and use scenario planning to overlay these onto any existing budgets and forecasts. Using mini scenarios, management teams can look for crunch points and plan accordingly. 

If borrowing is needed to manage future financial crunch points, act early to secure the best terms. Despite recent market uncertainty, lenders are still open for business. They will expect to see a well-structured proposal backed up by balanced forecasts that set out best and worst-case scenarios.  

If your business would like any support or guidance with scenario planning different financial influencing factors against budgets and forecasts to better understand their impact, our team can help.

For more information, please speak with your accountant or business adviser, or get in touch with us here.