Practical Financial Planning When Times Are Still Uncertain

Written by Wise Advice Team | 01/05/2022

The end of the financial year has come and gone. Now it’s time to get your finances in order and start planning for the financial year ahead.

But, how can you do that practically when times are still so uncertain?

We hate to say it, but Covid is still here and likely to cause disruption in the coming year, particularly for tourism and hospitality businesses.

With all the isolation periods, lockdowns, alert levels, traffic lights, and various other complexities, you might feel like giving up on planning anything for the future. But in times of uncertainty, having a plan is more important than ever.

That being said, it's crucial to make your plan realistic and flexible so you can move with any changes. Businesses that can flex and react to any changes quickly stand more chance of surviving.

So, let’s look at how you can tackle your financial planning this year.

Top Tips For Planning In A Covid Environment

There is no point in creating plans that you’ll never be able to follow through on. So, here are our top tips for practical financial planning in these most uncertain times:

    Use Your Previous Experience

We've been living with Covid for some time now. While we don't know what the future holds and the situation changes regularly, you will now have some indication of how your business performed during the pandemic and especially during lockdowns.

This can help you identify areas that might need strengthening for greater resilience in the future and areas where you performed well and can expect to do so again. 

Because things are so changeable, don't be disappointed if your goals are similar to last year. Depending on your situation, you may be able to plan for growth this year. But, you may need to be more conservative and plan to survive rather than thrive.

 

    Keep Up To Date With Consumer Behaviour

Even as rules relax, you might find your customers are not behaving quite how you expect. Things might not return to the “normal” that we remember. For example, businesses like bars and restaurants might find that traffic remains lower even though there are no restrictions because people are still wary of being out in enclosed spaces.

There's also been a large shift towards online shopping and e-commerce. So if you can run parts of your business online, you may be able to tap into a new customer base.

    Keep A Close Eye On Stock

One thing businesses found from lockdowns was the problem of suddenly having excess stock that could not be used. For hospitality businesses in particular, there was a lot of food and beverage wastage. You may want to assess your stock levels for the coming year and work out if you can hold less stock to minimise wastage.

On the flipside, there are other industries that are running out of stock due to shipping delays. Make sure you undertake regular stocktakes to ensure you have the appropriate level of stock on hand, ordering with a buffer for delivery delays.

 

    Think In Shorter Timeframes

While you may have once created a 5, 10, or 15-year plan for your business, now is the time to focus on slightly shorter time frames. Create a plan for a year at a time or even from month to month. This gives you more flexibility to review your plan and adapt it if necessary.

Look for ways to diversify your business, reduce your costs or streamline your processes.

It doesn’t mean you can’t still have long-term goals, you just have to be a bit more practical about the changing times and understand the timeframes may be longer in the current climate.

    Budget For The Best Case And Worst Case

In uncertain times, it can help your planning to have several budgets laid out - one for a situation that remains much the same as your current one, one that plans to hit your previously stated goals, and one that deals with the worst-case scenario.

Then plan the cash flow you will need for all of these situations. Again your previous years' figures will help show you what your worst-case (probably during the total lockdown) looks like.

Think about whether you can afford to build a contingency fund, where you could hold some money in an emergency.

Keep communication open with your suppliers and those who will owe you money to ensure you can deal with any delays. Try to frontload your cash flow while things are going well, so you have a reserve if the situation changes.

 

    Explore The Opportunity To Tap Into Government Or Local Support

Although the level of government support is reducing as the pandemic moves on, options are still available that may help with your cash flow in the coming year. Initiatives run by local authorities may also help.

Good forecasting will allow you to apply for any available help in a timely fashion that won't leave you falling short. You may also consider developing a line of credit or other options like a business loan, but seek advice from your accountant first.

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