As we get ready to wind up 2023 and head into 2024, now is the opportune time for business financial planning.
A well-developed business financial plan, or budget, helps you manage to your expectations. It provides measures to keep things on track. (And as we all know, “If you don’t measure it, you can’t manage it.”)
Creating a financial plan for your business is critical to helping you navigate these 3 challenging issues that I see coming in 2024.
- Growth will be slower than in 2023. According to IMF, the predicted GDP for 2024 will be 1.5%, down from 2.1% in 2023. This change is in large part due to a slowdown in consumer spending as interest rate increases, inflation, and decelerating wage growth impacts spending. If your business or your clients’ businesses are consumer focused, it could affect your predicted 2024 revenues.
- Inflation pressures continue along with rising labor costs. Your budget should consider the changes to the rate of inflation. A Vistage survey of manufacturers indicated 62% of them plan on increases in automation to help offset continued labor supply and cost issues. Wage inflation will be strongest in the leisure and hospitality industry with education and health services a close second.
- . Other factors that you should consider in your planning for next year:
- Credit card delinquencies have risen sharply over the last 8 quarters to 2.8%
- Higher interest rates including mortgage rates are approaching 8%
- A weaker dollar makes imports more expensive
- COVID-era stimulus is waning, and the savings rate is starting to lower
- Transportation costs are in flux with consolidation occurring and this summer’s bankruptcy of Yellow Freight is an indicator of too much capacity
Now that you have your parameters in mind, the financial plan is simply a description of the day-to-day activities that will help you achieve it. This can be as simple as determining how many new clients you will need at X dollars per month, or more detailed with specific key performance indicators for all areas of the business (finance, operations, sales and marketing, HR, etc.),
Start planning today so you can prepare for whatever comes your way tomorrow. Let us know how we can help.
Here’s to planning a successful 2024!