4 reasons every business owner needs a financial forecast to weather the Coronavirus storm
Clear Vision’s Adam Coles highlights 4 key reasons you need a financial forecast at this time. The Coronavirus has brought uncertainties for families across the UK who continue to take the action they can to keep control of their lives. A financial forecast represents a tool you can use to maintain control of your business. You may have previously produced a financial forecast at the request of your bank manager. Perhaps you created one to present to a potential investor in your business. Now is the time to produce a forecast to help you and your business directly. Here are 4 reasons why the Clear Vision team urge you to produce a financial forecast now:
- Reason 1: To reduce the anxiety you feel
The obligatory closure of all businesses, bar those deemed to be key to supporting a population on lockdown, brought with it a noticeable drop in income for the majority of UK businesses. In some cases, business income has been decimated. This sudden, unexpected event has understandably generated a high level of anxiety for a huge number of business owners. If you are included in this number, you’ll appreciate that this anxiety has the potential of impacting all parts of your life, especially if you find yourself amongst the majority of business owners working at home in your family space. First and foremost, it is vital you make use of a financial forecast to help reduce the anxiety you are feeling by providing financial clarity. A forecast sets out how much money your business can expect to receive in, and pay out, in the upcoming period. It provides financial visibility and aids proactive planning, providing you with a sense of control. When you know how your business now stands financially, you can take action and take decisions to protect it until normality resumes. You can negotiate accordingly with your debtors and creditors. You can highlight and apply for the additional funding you require. Imagine how much better you will feel with a plan in place. Knowing you have a plan to get your business through the crisis will not only benefits your business but also reduce the level of distraction and anxiousness you feel during your time with loved ones.
- Reason 2: To establish the level of financial support you need to maintain your business
Forming a plan to weather the Coronavirus storm starts with getting a clear picture of the financial support your business needs, together with clarity on any action you need to take. A financial forecast enables you to gain clarity on the level of income drop your business has, and will experience, in the short to medium term. No one knows when businesses will be able to open again and when they do, how long the recovery process will take. A financial forecast can be flexed to produce different versions based on the assumptions made. Knowing you have considered the ‘What ifs’ involved and can revert to Forecast B (or C) in the event your business income continues to be hit in the longer term is hugely comforting.
- Reason 3: To establish the financial support you need to tap into and when
The Government has announced an unprecedented programme of financial support for businesses and is working to set up the mechanics to deliver the grants and loans pledged. In some cases this will involve business owners tapping into alternative sources of support, such as overdraft extensions, to tide their businesses over until Government monies are paid. A financial forecast highlights the level of funding you will need and for how long. You can then take the action required to secure the funding you need and gain vital reassurance for you personally at this time. For owners of small businesses, whether incorporated or sole traders, the payment of tax represents a key ongoing responsibility. A financial forecast provides a picture of your cashflow. It enable you to identify whether you need to make use of the tax payment deferments now on offer, and when doing so, how you will cover the higher tax payments to come. This visibility gives you a strong platform from which to negotiate with HMRC.
- Reason 4: To establish the level of personal financial support you need to maintain your family income
One of the reasons you have your own business is to serve your life and your personal goals, so make sure your own needs aren’t overlooked in your plan for your business. Do you need to take a mortgage holiday? Negotiate a pause or deferment of rent payments? How long for? A financial forecast will highlight how your personal drawings will be impacted in the coming months, allowing you to take up the appropriate help available.
A financial forecast provides financial clarity for your business. Clarity that supports contingency planning, decision making and helps you deflect issues for your business during the current crisis. When you make the most of these benefits, it bolsters your business and helps you to make sure it weathers the Coronavirus storm. It also helps you regain a sense of control over the situation and in so doing reduces your personal stress levels. The business owners we work with are enjoying the confidence and peace of mind that comes with making use of a financial forecast at this difficult time. To discuss how you can produce a financial forecast for your business, call 01249 712074 or email firstname.lastname@example.org. We’ll be delighted to discuss this process with you.
Adam Coles AAT
Client Account Manager