Now that autumn is here and children are back at school, entrepreneurs are determining how to finish the year strong and gain momentum heading into 2024. AcceleratingCFO has been preparing all of our clients for the 2024 budget season, and the first step is always to analyze the previous eight months of results. Once you have this analysis completed, most companies will be able to glean how the rest of the year will turn out (with some immaterial variance).
As you prepare for 2024 budget season, you should consider the following factors:
- Evaluate your Key Performance Indicators (KPIs): If you haven’t already identified your KPIs, this would be the optimal time to do so. If you have a good feel of your KPIs, review your prior year and year-to-date performance in order to ensure that you have the most current and relevant data available. It would also be helpful if you benchmark your company’s financial performance against an external metric, such as interest rates, consumer sentiment index, or core inflation rates. By analyzing external and internal data, leaders can evaluate which KPIs are most useful.
- Understand Cash Flow and Profitability Drivers: Although it sounds basic, many companies fail to understand ancillary costs that arise from strategic decisions. For example, a business that is highly dependent on enrollment or number of customers serviced will likely need additional management or staff to manage times of high volume. As a second example, some business owners will need to evaluate whether an immediate investment in software technology will reap increased cash flow over the long-term. It’s important for the finance staff and entrepreneurs to review how increases in revenue and margin impact all costs.
- Involve Employees: Brian is a big proponent of having multiple levels of staff engage in the budget process. This is because, in order to get a full evaluation of how accurate your budget will be, you need participation from all functions in a company. From sales and marketing to the office manager, all staff functions have key factors that allow them to do their job and maximize profitability. And when employees get involved in the budget process, not only do they feel vested in the performance of the company, but they also understand how their role impacts the overall performance of the product or service.
It’s hard to believe that 2023 is almost over. But time waits for no one! And by taking the time to plan and take stock of how the past year has transpired, you will be able to both learn more about the company and understand how 2024 can be your company’s best year yet!
Take-away: If you require assistance in planning your 2024 budget or in evaluating your forecasting process, please reach out to us at firstname.lastname@example.org.