Background – Start 2023 Fresh
As you transition into 2023, the time is perfect for forecasting your finances by examining your budget, your level of debt and your investments to confirm that they align with any revised goals you may have. Here are six suggestions to help you on your way. We also include a couple of pointers to increase your success with business sales forecasting and forecasting methods.
1. Revisit Your Household Budget
The best way to start is to re-examine your budget. Calculate your average monthly income and your fixed and variable expenses. This step is more important than ever due to the impact of high inflation on household expenses such as food and petrol but also because of the resultant large rises in rents and mortgage repayments due to the multiple increases in the cash rate by the RBA this past year.
2. Check Your Emergency Fund
It is usually recommended that an emergency fund should consist of at minimum three to six months’ worth of living expenditures, tucked away into a “rainy day” account that can be readily accessed.
An emergency fund may help you avoid liquidating portfolio assets at potentially depressed prices during periods of market volatility. It may also help keep you financially afloat should unforeseen circumstances have an impact on your life. For example, you may experience an unexpected change in your employment situation. This emergency buffer will hopefully be enough to get you through a difficult period.
3. Take Control of Your Debt
If possible, reduce your debt levels. Perhaps consider whether the Christmas bonus or a raise could be used for extra payments against whichever of your debts has the highest interest rate.
As for any remaining debts, it may be possible to consolidate multiple credit card or loan balances into a single loan with a lower rate. This will reduce the stress of dealing with multiple financial dealings and deadlines. Speak to one of our Financial Advisors about possible solutions.
4. Prioritize Your Wellness
Although the pandemic no longer seems to be having such a detrimental influence on people’s minds as it initially did, it is always a good time to prioritize your personal and financial wellness. Consider taking advantage of any available employer wellness resources to aid with physical, mental or financial health. Many companies offer financial-education programs and digital learning tools, which can supplement the advice you receive from a Financial Advisor. Using these tools may allow you to make better use of other workplace benefits, such as a retirement plan, equity compensation or group insurance, if available.
5. Make Sure You’re on Track With Your Forecasting Goals
Check whether you are still on course to achieve your goals, such as saving and investing for a comfortable retirement. If recent market conditions have temporarily thrown you off course, work with your Financial Advisor to determine a way to get back on track.
If you are still on track with your goals, perhaps talk to your Financial Advisor about any new goals you want to achieve. For example, during 2023, could you boost your contributions to your superannuation account? Your Vogue Advisory Group Financial Advisor can help you look at the year ahead and assess your progression with this objective.
6. Identify Obstacles to Accurate Sales Forecasting and How to Overcome Them
Formulating a fiscal plan for Q1 and indeed the rest of 2023, may present a few challenges, including barriers to accurate sales forecasting. Miscommunication often contributes to inaccurate sales forecasts.
Accurate forecasting comes down to information regarding streams of revenue sources. For instance, chief revenue officers (CROs) and chief operating officers (COOs) predominantly focus on sales goals. Nevertheless, CFOs frequently need to remind them to consider the actual sales data and compare if those goals are being met and if sales forecasts need to be altered.
Since a COO or CRO knows the intricacies of the company’s sales objectives, they must constantly communicate with the CFO and finance and sales departments to ensure an accurate forecast.
The difficulty of accurately forecasting sales is also intensified by failing to look back at the performance of previous quarters. Evaluate your Q1 budget from 2022 and assess how close the company came to its sales forecast for that quarter. It will help you adjust accordingly.
7. Consider Using Different Forecasting Methods
Business leaders and finance department managers may develop a habit of sticking to one forecasting technique when formulating a fiscal plan. For some companies, this tactic works well. The best forecasting and practice methods depend on the model as well as the industry of the business.
It is not a matter of how many methods are being used. What matters is the quality of the technique. If you choose to use more than one method, doing so permits you to contrast and compare models to determine which method works best for your company.
If you have only used one forecasting technique in previous years, review the performance for each quarter to evaluate how accurate those forecasts were. If those forecasts have been consistently inaccurate it’s time to consider a diverse approach. Alternatively, if the forecasting method used in previous years works, continue with that approach. Identifying one or more effective ways will benefit you in streamlining your forecasting processes.
The content of this article’s intention is to provide a general guide to the subject matter. You should seek specialist advice about your specific circumstances.
Vogue Advisory Group – Final Thoughts on Forecasting in 2023
Forecasting requires taking a step back, in order to see the bigger picture moving forward. Business leaders and department managers must consider the company’s past, present and future when developing a budget and allocating resources for Q1 and the remaining quarters of 2023. Doing so will assist you to identify areas of business where you can apply cost-cutting measures.
For instance, the after-effects of the Covid pandemic are filtering into 2023 for many companies. If your company converted to a hybrid work model, you could condense costs by moving into a smaller office. If your company is reverting to a fully in-office work model, assess the investments made into technology (virtual desktop infrastructure, Zoom access, equipment for remote access, etc.) and decide if any of these resources are still required.
As uncountable business leaders learned at the peak of the pandemic, unexpected factors can significantly alter a company’s budgets and forecasts. When creating a budget and forecast for Q1, expect the best, but prepare for the worst.
Contact us if you require our assistance, and one of our financial advisors can help you.