Uncertainty can be a major threat to your strategic financial planning.

Being unsure of what lies around the corner makes it difficult to make those important financial decisions around operational budgets, investment and growth funding.

But by using forecasting and scenario-planning, you make it easier to manage your finances and reduce some of the financial uncertainty.

Looking to the future with your financials

Analyzing your cashflow statements, profit and loss reports and quarterly management accounts gives you an indication of where you’ve been as a business. But these reports don’t tell you much about where you’re going, and what your financial future may look like.

By looking forward, rather than backward, you can start to get a better idea of the landscape that lies ahead – including future cashflow, revenue, profits and operational budgets.

Five key techniques you can use to reduce your financial uncertainty

1. Cashflow forecasts

Cash is king, so having a detailed overview of your cashflow trajectory is vital.

With cashflow forecasting apps, like Fathom, you can predict your cash availability and spot potential cash shortfalls – while there’s still time to plug the hole. By cutting expenses or seeking short-term funding, you can keep the business in a positive cashflow position. It’s this forecasting and foresight that keeps you trading, despite the uncertainty in the market.

2. Revenue forecasts

Knowing the future patterns in your sales and revenue data helps you keep your income stable.

Revenue forecasting apps, like Clari analyze your sales data, revenue trends and market shifts to anticipate fluctuations in your revenue. Armed with this future view of your potential revenue, you can adapt your pricing, invest in more marketing and make your income more consistent.

3. Scenario-planning

There’s always more than one potential outcome of any business situation. Having a plan B (or C, D and E) allows you to understand the multiple potential possibilities – and plan for them.

An app like Modana helps you model potential ‘what-if’ scenarios, so you can see the possible outcomes of an economic downturn or disruption to your supply chain disruptions. This kind of scenario-planning makes it easier to make contingency plans and mitigate the potential risks.

4. Profit projections

Being a profitable enterprise is important for several reasons. It shows lenders you’re a low-risk borrower, allows you to invest in the business and drives your dividend payments.

A tool like Teamwork helps you track your performance and estimate future profitability, factoring in variable costs, sales and market changes. This helps you determine your price point, drive cost-cutting measures or make investment decisions that keep the profits rolling in.

5. Budget forecasts

Tracking and forecasting your budget performance keeps your expenses in check.

Budgeting apps, like Jirav, help you build dynamic budgets and remain on budget to achieve your financial goals. Budget forecasts help you track your performance, control your expenses and cut any unnecessary spending, keeping you on track with your agreed budget.

Making your financial future clearer and easier to navigate

With so many ups and down in economic conditions and the costs of raw materials and labour, getting serious about financial forecasting really is a must.

Come and talk to us about the key areas of financial uncertainty in your business – and find out how we can guide you through these uncertain times and out the other side.

The following content was originally published by BOMA. We have updated some of this article for our readers.

Artificial intelligence (AI) has been a catalyst for a huge amount of change in the small business arena.

AI apps, tools and solutions are everywhere, offering increasingly sophisticated ways to automate your processes and add value for your customers.

On average, over a third (38%) of small businesses in Australia, New Zealand and the UK have used, or are considering using, AI according to new research from the global hiring platform Indeed.

But what does AI do for your small business? And what do all the highly technical pieces of jargon mean?

To help you demystify AI, here’s a glossary of some key AI terms

1. Artificial intelligence (AI)

AI is the simulation of human intelligence in machines. AI allows machines and software algorithms to learn, problem-solve and automate certain tasks. For small businesses, AI can help to streamline your operations and enhance your customer service. It can also provide data-driven insights for better decision-making that drives your growth.

2. Machine learning

Machine learning (ML) is a subset of AI where systems learn from data, without any additional programming. In other words, ML helps an AI solution learn by itself. For small businesses, ML helps your AI tools improve over time, helping to automate your basic tasks, personalize customer experiences, create content and provide predictive analytics.

3. Data source

A data source is any location where information is stored, like customer databases or website analytics. If you’re using AI in your business, these data sources provide the raw material for machine learning. The more expansive your data source, the more targeted and refined your outputs will be, and the more opportunities there will be to add value with AI.

4. Data analytics

Data analytics examines your raw data to draw insightful conclusions. For small businesses using AI, analytics can give you deep insights into customer behavior, market trends and operational efficiency. The reporting you get from proactive data analytics is invaluable, allowing you to make business decisions that are based on solid evidence and data.

5. Algorithm

An algorithm is a set of rules that a computer follows to solve a specific problem. In AI, algorithms allow machines to learn from data, make predictions and automate certain processes. For small businesses, this translates to rules and AI processes that make tasks more efficient, answer customer FAQs or give you deeper data analytics.

6. Generative AI

Generative AI creates new content, like text, images or code. Chat GPT and Google Gemini are two well-known generative AI tools. For small businesses, you can use generative AI to automate your content creation, produce copy for marketing materials, create images and video and even personalize your customer interactions on the phone, or through chatbots.

7. AI prompt

An AI prompt is a text input that instructs an AI model to generate a specific output. You type what you want and the AI tool attempts to create the output you’ve requested. This could mean asking AI to improve the writing of your sales email, or to generate an image for your marketing flyer. It could also be a prompt to analyze a data set to look for a specific trend or pattern.

8. Voice AI and natural language processing

Voice AI uses natural language processing (NLP) to understand and respond to your spoken commands. It’s the technology that powers tools like Siri and Alexa. For small businesses, voice AI allows you to automate your customer service via chatbots, automate the answering of your business phone with voice AI agents or carry out voice-activated searches etc.

9. AI hallucination

AI is a massively useful technology. But it’s not perfect!

AI hallucination is when an AI generates false or nonsensical information, and then presents the output as fact. For small businesses, this can lead to incorrect customer responses, misleading marketing content, or flawed data analysis. Because of this inherent potential for false outputs, you must always review your AI content, especially factual content, to make sure it’s true.

Talk to us about introducing AI into your business

If you’re still an AI newbie, don’t worry. In this series, we’ll run you through the basics of AI, the main terms and the AI tools and agents that can transform your business.

The following content was originally published by BOMA. We have updated some of this article for our readers.

To understand the financial position of a business at a specific point of time, look at the balance sheet.

The balance sheet may also be called the statement of financial position. Together with the Profit and Loss Statement, and possibly other reports such as the Statement of Cash-flow, these reports provide a complete understanding of the financial position and business performance.

So what’s involved? – The balance sheet has three sections: assets, liabilities and equity.

What are Assets?

Assets are things and resources that a company owns. They have current and/or future value and can be measured in currency.

Assets may be subdivided on the balance sheet into bank accounts, current assets, (receivable within one year), fixed assets, inventory, non-current (or long term) assets, intangible assets and prepayments.

These include banks and other financial accounts held, accounts receivable (trade debtors), supplier deposits or bonds, stock on hand, property, equipment, vehicles, investments and intellectual property. All of these can be translated into monetary value.

What are Liabilities?

Liabilities are amounts owed to suppliers and other creditors for goods or services already received. Liabilities may also include amounts received in advance for future services yet to be provided by the business.

Liabilities are generally subdivided into current, (payable within one year), and non-current liabilities.

These include accounts payable (trade creditors), payroll obligations (salaries, taxes, superannuation), interest, customer deposits received, warranties and loans.

What is Equity?

Equity includes owner funds contributed, drawings, retained earnings and stocks. The value of the equity equals assets minus liabilities.

Transactions that affect profit and loss accounts also affect balance sheet accounts. For example, providing a service increases the accounts receivable balance, which therefore increases the equity.

The Balance Sheet Equation

The balance sheet must always balance! Asset value = liabilities + equity.

For example, if you buy a new vehicle for the business at say 50,000, having paid a 10,000 deposit and taking out a 40,000 loan, the value of fixed assets increases by 50k, but the bank asset value decreases by the 10k deposit paid. The value of liabilities increases by 40k loan, thus leaving the balance sheet balanced on both sides of the equation.

The balance sheet equation shows you how much money you would have left over if you paid all your bills and debts and sold all your assets at a given date. This amount is the Owner’s Equity.

Note that the balance sheet equity total is not necessarily how much the business is worth at market value. Assets are listed on the balance sheet at their transaction value, which may be very different from the market value. Some assets may be worth more, and others may depreciate in value. Business value is calculated not just on the balance sheet figures but many other factors.

Need more information?

Talk to us. Get the complete picture of your business performance and financial position, regardless of what stage of business you are at.

The following content was originally published by BOMA. We have updated some of this article for our readers.

Knowing what’s around the corner is hugely valuable as a business leader.

But we’re trading in a world where uncertainty waits around every corner – making it difficult to predict the future business landscape and what your next move should be.

You can’t change the evolving economic, political and business threats in the world. But in this series we’ll show you some key way to thrive and reduce the uncertainty.

Dialing down the uncertainty, to gain a competitive edge

Uncertainty affects your ability to trade. Not knowing if your costs will rise or fall, or if there’s a talent shortage or surplus, makes it difficult to make rock-solid decisions and plans.

Your goal in the current environment is not to remove these external threats. It’s to reduce some of the uncertainty through clear planning and inventive strategic thinking.

Let’s look at 5 key areas, and how they can dial down the uncertainty.

1. Financial forecasting and planning:

Carrying out regular cashflow forecasting and budgeting helps you anticipate any potential financial challenges. Good cashflow forecasting, coupled with scenario planning, helps you make informed decisions about your spending and where you may need additional funding.

2. Performance monitoring and analysis:

Tracking important metrics and having a key performance indicator (KPI) dashboard helps you review your performance against targets and look for the areas of improvement. Monitoring those KPIs keeps you in control, even if external factors and threats are proving to be difficult.

3. Strategic business reviews:

When was the last time you revisited your business plan? Updating your strategy and business plan helps you stay aligned with your goals, even if external factors and changing market conditions are making trading difficult. Remember, no business plan is written in stone!

4. Getting proactive with tax updates:

As the business landscape changes, the government is likely to look for ways to inspire enterprise and boost the economy. Being aware of legislative changes, tax reliefs and allowances, and available government grants, helps you navigate the uncertainty. You can keep compliant, maximise any benefits and see the positive impact on your capital position.

5. Business Diversification & Growth Strategies:

Being able to flex and change your strategic direction gives you a huge competitive edge. Brainstorm ideas for ways you could diversify your offering and explore new opportunities. This could mean new products, new revenue streams and even partnering with other small businesses – both inside and outside your existing sector.

Making the path ahead clearer and easier to navigate

There’s no denying that we’re trading in difficult times. But getting proactive with your planning, forecasting and strategic thinking makes the road ahead clearer.

Come and talk to us about the key areas of uncertainty in your business – and find out how we can guide you through these uncertain times and out the other side.

The following content was originally published by BOMA. We have updated some of this article for our readers.

4 key tips for delivering the income that fuels your chosen lifestyle.

Making your business a success story may be what drives you to get out of bed every morning. But your business also needs to deliver on your personal goals as well.

Profits, dividends and bonuses need to be stable enough to help you maintain your desired lifestyle, whether that’s two holidays a year, or paying the mortgage on a new family home.

In this series, we’ll look at the core ways your business can be structured to deliver on your own personal, family, philanthropic and leisure goals.

Delivering the income that fuels your chosen lifestyle

When you start a business, you make some fairly major decisions about your quality of life. Building a start-up could mean several months, or even years, of reduced income. But, ultimately, you’ll want an income from the business that helps you fund your chosen lifestyle.

Here are four key ways to make sure your business can secure your lifestyle:

1.  Focus on high margins or high volume

Prioritise products/services that offer either high margins or high volumes of sales. Your key focus is to help the business provide stable, predictable revenue and profits. This will help you draw down the necessary income for your desired lifestyle.

2.  Get strategic with your pricing

Adjust your pricing so you’re competitive but making some healthy margins. Value-based pricing and bundling helps to increase the value from each transaction. The more you do to boost the price of an average sale, the easier it will be to supply the income needed for your lifestyle.

3.  Hang on to valued customers

You can quickly improve your customer loyalty stats by offering personalised services and programs. Retaining your existing customers is cheaper than acquiring new ones, so keep these customers sweet and enjoy consistent revenues that power your personal income.

4.  Automate your most costly processes

Labour costs can quickly eat into your profits. Think about automating basic tasks and outsourcing non-core functions, so you’ve got more time for high-value revenue generation. Reducing your overheads can directly influence your own potential income as a director.

Creating a profitable, cash-rich enterprise is the dream. And if you can stabilise your sales, revenue and profitability, you increase your chances of a healthy income from the business.

Come and have a chat about working smarter, not harder.

The following content was originally published by BOMA. We have updated some of this article for our readers.