For business owners, the beginning of a new year brings new ways to intelligently invest in your organization to further improve your portfolio. While the year is already underway, and budgets, planning, and goal setting for businesses of every size are finalizing, it’s never too late to take a look at your business’s plan to ensure goals set are not only realistic, but attainable. Here are some things to keep in mind.
The State of the Market
Economic health across almost every industry took a hit in 2022 and, while we’re in a new year, projections currently see 2023 as equal parts “more of the same” and “slow recovery” across a number of key factors for business growth.
Inflation likely peaked sometime during the third quarter, but it remained high throughout the rest of the year and into 2023. Supply chain disruptions aren’t helping, and it’s likely that prices will continue to remain above the Federal government’s 2% target until sometime next year.
A possible recession is looming, and the GDP growth forecast supports that. Our economy is predicted to fall into a shallow recession during the first half of the year.
Right now, the Fed is combating inflation by raising interest rates. While that may be effective in staving off a recession, it’s not helping our economic growth. Everything seems unreasonably expensive at the moment, which is why it’s so important to have a firm grasp on your finances.
Another key factor is the current job market. Unemployment rates are currently estimated to rise slowly over the next three years. S&P Global predicts that we will reach 4.8% unemployment by the end of 2023.
Begin to Understand Your Finances
Every business owner should regularly (and thoroughly) understand their profits and losses, and manage their budgets to allow for financial reserves in future quarters. The truth is, nobody really knows what the impact of a potential recession will be or how long one will actually last. That’s why it’s important to eliminate any unnecessary expenses, have extra cash flow when possible, and secure a reliable line of credit in case of emergencies.
To understand your finances, begin by reviewing previous quarters. See what your expenses are and how often they occur. Have you missed any potential tax write offs or investment opportunities? If you have an accountant or CPA, meet with them to go over everything. With a potential recession looming, it’s more important than ever to be proactive with your finances.
A Checklist for Small- to Medium-Sized Business Owners
When it comes to financial planning, business owners can have a daunting task. You’re not just responsible for your own financial wellbeing, you have to maintain a company and plan for its wellbeing, as well as your employees.
We have a list of suggestions business owners can use to set yourself up for success.
- Consider the top risks your business could face and create a contingency plan.
- Create cash flow projections.
- Plan your taxes properly.
- Make a plan for borrowing money or taking out loans.
Think about your potential worst case scenarios that could happen in the coming year — and come up with a plan for how you might combat them.
You can’t predict the future, but you can use your business revenue to predict the amount of money entering your business over the coming quarters.
Keep detailed records, separate business expenses from personal expenses, and hire a good accountant to get your business through tax time.
At M&F Bank, we offer small to medium-sized business government-backed loans that help companies meet their goals and get ahead.
Build a Relationship With Your Banker
While this is good advice for everyone, it’s especially valuable for business owners. When you work with the same banker over time, they’ll get to know your business and will be able to recommend targeted products and solutions. Plus, they’ll be able to better help you with building budgets, understanding your Profit & Loss (P&L) statements, and setting you up for success with products, services, and third-party resources that make sense for both your business and your goals.
Use the Resources Available to You
Speaking of resources, you don’t have to go through financial planning alone. Take advantage of resources available to you within your community, starting with your bank.
At M&F Bank, we recommend taking advantage of our free, online financial education tool: Smart Money Habits. With different categories available, including Financial Foundations, Building financial capability, Building financial resilience, Roadmap to financial strength, anyone can use this tool to learn how to set themselves up for financial success. Easily access information on basic finances to more advanced strategies for both individuals and business owners.
Looking for resources in your community? Reach out to M&F Bank today to speak to a banker and learn more about your options in NC.