Business Planning for 2022
Business Planning for 2022 Discussed by Hayvenhursts Accountancy Services
The outbreak of COVID-19 in 2020 took us all by surprise and has impacted people and businesses in so many different ways. Some businesses have seen huge growth. Some have had to fight to survive and some sadly haven’t made it.
2022 is looking much brighter in regards to the pandemic and if there was ever a year to take action and plan your budget carefully it’s this year.
A lot of businesses had to make quick decisions when the pandemic hit and we were forced into lockdowns and they were faced with a situation none of us probably ever even dreamt of, let alone plan for. Some of these decisions would have been great quickly acted on decisions and others may have not worked out but at least at the start of 2022 millions of people in the UK and across the world have been vaccinated and coronavirus is not the death sentence we thought it would be at the start of 2020.
It is now understood that coronavirus is likely to never go away completely, however, we are all learning to live with it with medical research and developments coming on in leaps and bounds.
As business owners, we know what we are dealing with much more than we did and this along with our experiences over the last two years can help us plan a thorough and more factual expense budget for our businesses for the year ahead.
Now is the key time to analyse where we were, where we have been and where we are now whilst striking a balance between saving money and keeping up with the key initiatives that will help us get back on track after all this.
In a recent Gartner survey, almost three-quarters of CFOs surveyed said a focus for 2022 will be improving the flexibility of budgeting and forecasting. Gone are the days where forecasting once or twice a year is sufficient for management to see how close or far off the business is from budgeted numbers.
Changes in the business environment inevitably force companies to deviate from their planned budget. Finance leaders typically look for quick wins when disruptions happen. They may slash selling expenses or general and administrative expenses (SG&A) or move resources within a business unit to avoid difficult trade-offs between business units, Faith Vakil, director of research at Gartner, said in a news release.
But the approach is not fail-proof. When quick wins dwindle, finance leaders are forced to make budget trade-offs at the last minute. The better way is to embed flexibility in budgeting and forecasting with cadenced reviews and, when beneficial, make trade-offs between business units, the Gartner report said. This changes the mindset within the organisation and can encourage innovation and willingness to align to shifting priorities.
Sourced from: https://www.fm-magazine.com/news
If you are a small or large business, whether you are looking to grow or maintain you should always have plans in place to focus on and to fall back on if you need it. As the last 2 years has shown us you never know what’s around the corner and customers or revenue that you are relying on may not always be there.
1. Regularly Review Your Costs
If your expenses are high, your profit will be reduced meaning you will be unable to reinvest the money you want and need back into your business. Reviewing your costs, line by line every month will help you keep focus and know what’s happening. You may not realise what your business is spending money on and doing this helps you understand and analyse if you can reduce any areas of spending.
A good profit margin is positive and means less pressure overall. Profit margin shows how much profit you have on every pound of revenue after all operating expenses and tax has been deducted. Profit margin shows the overall success of your business and the higher the profit margin the more your business will be valued.
Separate Your Costs Into Fixed and Variable Costs
Fixed or Overhead Costs
These are expenses that remain steady over time and do not necessarily impact the product or service you provide. These can be rent, utilities, phone, internet, business insurance, business accreditations, loans and much more. They are the costs that will remain in place whether you
are trading or not trading.
These are the expenses that relate to the service or products you supply. These will vary by day, month, quarter and can include the cost of materials, staff costs if you have a business that increases and decreases staff in line with demand, product costs, material costs, water, gas and electricity if you arent on a fixed rate. Variable costs will often directly influence the service you provide or the quality of your product so cutting these should be considered carefully.
- Look at any areas of expenditure you could completely remove from your business as they are no longer needed, they are no longer giving you a financial return and, or, no longer positively impacting either new customers and, or positively impacting existing customers
- Look at any areas of spend you can review and decrease – as an example; renegotiate existing contracts with suppliers or services
- Review stock, supplies, services and customers
Tracking and analysing where and when you spend your money will help you to reduce it. Choose cheaper products as long as it doesn’t impact your brand or reputation. More expensive products and services are not always the best and are not always needed for everything.
Research and choose carefully and you can find high-quality products and services at affordable prices.
2. Review Your Existing Customer Base
Do you need to do anything to reward your existing customers for being loyal to your business, it costs far less to keep a customer than it does to acquire a new one. Are there any that if you lost them it would seriously impact the bottom line of your business and even put your operation at risk? If there are then these are the customers you should really focus on rewarding. Look at how you can reward them both financially and in the service you provide. Dependent on your business type you can, use loyalty cards or schemes for repeat business, offer loyalty discounts and offer free giveaways to reward loyalty. Whatever your business type the options are there for you to explore. Ask for feedback from your customers, what they like about your service, what you could improve on and how they would like to be rewarded as loyal customers. Ask them to post positive reviews about your products or services.
People and businesses now use customer feedback and reviews as a significant part of their buying decision so having them for yours will really help your business.
Feeling valued as a customer will mean you are more likely to buy a product or service again and recommend a business to others.
3. Review Your Competitors
Always know what your competitors are doing and how they could be a risk to your business. This will enable you to quickly adapt when you need to and not let them get ahead of you. Regularly review what services they are offering, at what cost and what you can do to remain competitive in the services and products you provide and offer. Look at how they are advertising and gaining new customers and review against what you are doing.
4. Review How You Advertise
Just because you have always advertised in a certain way, or not advertised at all doesn’t mean you shouldn’t review it regularly. Many businesses during the pandemic have had to quickly adapt to increase their online presence or enable customers to buy a product or service online without being present in a shop or unit. Just because you haven’t done it before doesn’t mean to say you can’t try it. You can run tests or trials so you don’t have to throw huge amounts of money at it until you know if it is good for your business.
Social media is a great way to reach your target market and there is a great proportion of people now that will buy most things online, or through social media. You can quickly gain a presence online and if you use a marketing agency to help you they will know the best platforms for your industry and the most efficient way to engage new customers and build a loyal customer base through social media.
If you don’t already have one, build a website for your business. Look at your competitors and if they have websites look and see what and how they are doing it. They may not be doing it the best way but it will give you ideas to think about. Use an experienced website company to help you with this and ask them how they can help you to get it ranking on different search engines utilising SEO services. It is normally better to use one company that offers both services to ensure the website you have built can accommodate the SEO side of things.
If you already have a website then review it regularly, never sit back and think it will always be fit for purpose. Ask yourself how it looks and feels from a customer perspective and what the customer journey feels like. Ask for feedback from colleagues and friends who will often come to it with a fresh face. Think about how you could automate your products and services for customers to purchase online and what that looks like.
5. Cash Flow Will Keep Your Business Alive
A 2019 study found that around 82% of businesses fail due to cash flow so this should be a constant focus for your business.
How To Improve Your Business Cash Flow
Use a professional accountant to review your businesses cash flow and provide cash flow predictions for the next 12 and 24 months. A good business accountant will be able to analyse your businesses financials and give you sound advice to help you make good decisions when it comes to spend, revenue and profit.
Never pay for products or services early than you need to and always leave it as late as you can to pay without encountering any penalties or bad will with suppliers.
Use credit cards for your business payments when possible. This will defer payments from your cash flow until the next billing cycle.
Shop around to find out who offers the best cost and payment terms and either renegotiate them with your suppliers or change.
Make it as easy as possible for your clients to pay you and if you can offering early payment discounts can often help.
Use an online invoicing and payment scheduling system to reduce payment delays.
Build early payment into your contracts and use good credit control processes to chase for any late payments.
Hayvenhurst Accountancy Services are focused on the needs of you and your business. We put a team of expert accountants together for you depending on this. Our professionals are experts in all types of industries and we can analyse your financials, support you in your planning for your business and make predictions for your cash flow and growth if you need it.
Contact us today on 02920 777 756 and can answer any questions you may have and arrange for one of our team to get in contact with you. Whether you are a start-up, small, medium or large size business we can help to ease the pressure and load for you and your team.