We hear a lot about “business confidence” in the news. Most often it’s in the context of local, national or global political or policy instability. When business isn’t sure what the rules will be, or what direction the economy is headed, it loses confidence. That means businesses, in a general and collective sense, stop investing: They don’t open new stores, expand operations, launch into new markets or employ extra staff.
Low business confidence is a reaction to the market. Business owners are insecure, unsure or spooked by market conditions. They’ve read the prevailing winds and they think now is not the best time to take on any new risk. In other words, they believe the potential for failure or loss outweighs the chances of reward and profit.
That’s the macro level. But there’s also something similar that happens within businesses themselves. And while you can’t necessarily do something about the broader economy, you can plan for it. No matter what’s happening in the world, no matter what the television and newspaper reports say about “business confidence”, it is entirely possible to ensure you’re making confident decisions within your own business, and not reacting to fear.
It’s all about arming yourself with the right tools and the right information. The secret to making decisions with confidence is long-term but flexible planning. Here are some specific tips to consider:
Have a five-year plan
Talk to your accountant and have a five-year plan. No matter what swings and roundabouts come round during the week, month or year, it’s important to have a clear plan of where you’re headed.
Having a longer-term plan in your back pocket helps you keep a level head. You’re not making big decisions on the fly, in reaction to external events, and perhaps getting them horribly wrong.
Budget for differing circumstances
As we’ve recommended before, it’s a good idea to have at least four budgets.
- Baseline budget – This is the most probable outcome for the budget period and the budget you take to the bank.
- Bad year budget – Where you’ve planned for low sales and a variable dollar.
- Good year budget – Work out what would happen if you get big contracts and high sales.
- Sandbox budget – Play with various scenarios, bringing in different factors so you don’t stuff up your other plans.
Lean on the expertise of your accountant and advisors
Your business does not exist in a vacuum. It is subject to outside influences. It’s time to move away from decision-making by “gut feel”. Don’t rely on a single source of truth. Draw on the expertise you have at your disposal — especially your accountant — and involve them heavily in your planning, budgeting and overall strategy.
How do you do that? One solution that allows you to bring all these factors together is Reep. Reep integrates with MYOB, Agrimaster and Xero accounting software platforms and allows you to import your data directly to get a clear picture of your cash flow, create a budget and forecast for the future. You can then seamlessly share this with your accountant and financial advisors.
Reep has cash flow planning, budgeting and forecasting facilities, allowing you to plan for whatever the future may hold so you can move ahead with confidence, no matter what the newspaper is telling you about “business confidence”.
For more information, contact us today for more information.