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How to use forecasts and scenario planning

Written by webadmin on . Posted in Uncategorised.

For centuries, accounting was all about reviewing historic information – but that only told you about the past, not what was going to happen in the future.

If you’re only looking back at past periods and historic numbers, this limits the insights you can achieve for your business. With a backward-looking ideology, it becomes difficult to plan, run through different scenarios or understand the path of the business going forward.

Forecasting changes this. With the right data analysis and forecasting tools, you can project sales, cash, revenue and profits into the future – and get in control of your business.

A forward-looking view of your business journey

Forecasting switches the focus of your financial management. By moving to a forward-looking view of your business journey, you can see further down the road – and that helps to spot any opportunities and avoid common business pitfalls.

Forecasting adds value by:

  • Highlighting the data patterns – a forecasting tool takes your historic data and projects it forward in time. This helps you and your advisers spot patterns, trends, gaps and opportunities, revealing the true ‘story’ behind your business accounts. For example, forecasting may reveal a predicted seasonal slump in the next quarter, allowing you to plan ahead and proactively take action to minimise negative impacts.
  • Giving you a future view of your business – instinctively, business owners will look back at prior periods to assess performance. There’s value to reviewing your historic actuals, of course, but using forecasting helps you to look forward, rather than just backwards. Forecasting is the satnav, showing you the road ahead, rather than the rear-view mirror showing you the road you’ve already travelled.
  • Helping you scenario-plan – with a financial model of your key drivers, combined with accurate forecasting, you can quick answer your burning ‘What if…?’ questions. Forecasting lets you run different scenarios, with different drivers, to see how business decisions may pan out over time. If option B performs better than option A, that’s invaluable information when defining your next strategic move.
  • Making informed, evidence-based decisions – having ‘the full picture’ of combined historic numbers, forecasts and longer-term projections aides your business decision-making. Forecasting gives you solid evidence on which to base your strategy, and helps to red flag any threats that are looming on the horizon – giving you the best possible information to keep your executive team informed and on the ball.
  • A deeper relationship with your accountant – forecasting also helps us to get a far more granular view of your business. This helps to spot potential areas of performance improvement, and to give you the best possible strategic advice, all backed up by solid, empirical data and management information.

Talk to us about the benefits of forecasting

If you want to get in control of the destiny and results of your company, come and talk to us. Forecasting helps you highlight your future threats and opportunities – and create a proactive strategy to improve the performance of your business.

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Why Productivity Matters and What You Can Do About It

Written by webadmin on . Posted in People and Culture, Uncategorised.

Productivity is a term linked to strong economies, successful businesses, and the efficiency of clever staff. If businesses were more efficient, we’d see fewer failures, more jobs, and better incomes for everyone.

According to the Xero Small Business Insights special report in Australia, the most productive industry in 2023 was wholesale trade ($214.20/hour), while hospitality lagged at $40.20/hour. Though productivity dipped across all industries, ten sectors, including manufacturing, agriculture, and construction, outperformed the national average ($100.30). Western Australia was the most productive state ($102.50/hour), with productivity 15% higher than Tasmania ($89.00/hour), the least productive state.

What is Productivity?

Productivity measures how efficiently a business turns inputs into outputs. The more productive you are, the better you turn resources like labour, capital, or materials into products or services you can sell.

Types of Productivity

  1. People Productivity: How much work it takes to deliver products or services to customers, usually measured as hours worked per dollar earned.
  2. Financial Productivity: How well a business monetises its investments in assets like machinery, often measured as the return on capital invested.
  3. Materials Productivity: How much a business spends on materials to generate sales, including inventory and energy.

Why Productivity Matters

More productive businesses get more from less. This boosts their potential to profit, handle inflation or slowdowns, and withstand price competition. Productivity gains are harder to come by nowadays, but digital tools have levelled the playing field, allowing small businesses to compete with larger ones.

How to Increase Productivity

There are four main ways to boost productivity:

  1. Better Tools: Tools amplify efforts. Invest in software or equipment that reduces manual work. For instance, a booking system that integrates with your calendar and payment systems.
  2. Smarter Methods: Continuously review and improve your processes.
  3. Skilled Workers: Invest in training and development.
  4. Entrepreneurship Mindset: Embrace optimisation and innovation.

Increasing Productivity Checklist

  1. Better Tools:
    • List potential investments and their costs.
    • Estimate the return on each investment.
    • Choose the best mix of affordability and impact.
  2. Smarter Methods:
    • Map out and document your work processes.
    • Identify and address friction points.
    • Implement software for repetitive tasks.
    • Align processes with customer preferences.
  3. Skilled Workers:
    • Ensure clear job descriptions and training.
    • Regularly provide and receive feedback.
  4. Entrepreneurship Mindset:
    • Look for scaling opportunities.
    • Stay open to acquisitions.
    • Focus on niche opportunities.
    • Continuously improve supply chains.
    • Hire and empower entrepreneurial staff.

Boosting Productivity is an Attitude

Small businesses can significantly improve productivity by constantly refining processes, investing in tools, and eliminating inefficiencies. With smart investments in teams and technology, the benefits will add up. Efficient businesses experience fewer delays, miscommunications, and wasted efforts, leading to increased satisfaction and profit.