By Stephen McConnell, Business Services Partner at Baker Tilly Mooney Moore
We ended 2022 much like the previous two years, with a bleak economic outlook and hopes that the busy Christmas period will be enough to see businesses through even the beginning of 2023. After that, there is little certainty of how the year might play out.
As advisors, we see periods of economic decline come and go every few years. In the latter months of 2022, the UK slipped into a recession that despite predicted to continue for much of the year, has recently been forecast to be a shallow and protracted decline. Now in the harsh reality of January, businesses are grappling with unprecedently high overhead costs, yet staff are hard to come by and salaries are inflating at a steady rate. Interest rates are up to a 14 year high, the price of raw materials remains elevated and the cost-of-living and doing business crisis is squeezing profitability from all angles.
We can already see that this decline will be different from that of 2008, different from the shockwaves that went through the economy when Covid-19 hit in March 2022, and different from whatever major challenge comes next. In the face of this, it will be the business owners and managers who are pragmatic, innovative thinkers that perform best throughout the year. Good planning is central to good performance, and having an agile, live accounting system in place is one of the best ways to react as circumstances change.
Live accounting brings what was once a monthly or quarterly approximation of your finances, profit, loss, and stock values into your daily operations, making it an integral part of your business workflow. Having this information on hand will allow any business big or small to be leaner and more competitive within the market, identifying areas where performance is strong and others that require some work.
With a difficult year and many unknowns ahead, fast information about your income, profit and loss will allow you to compare with previous periods and make choices to drive your business in the right direction, without waiting until the end of the month or quarter. Now well into January, those businesses that are heavily reliant on footfall will be seeing an impact on their revenue. Already, data from Springboard has shown that footfall at shops in Northern Ireland in the week post-Christmas was down 22.5% on pre-Covid levels.
This cutting back after the big Christmas shop will be felt in retail, while the relatively new practice of ‘Dry January’ means trade in the hospitality sector will have staved off considerably after the New Year celebrations. This is a cycle that plays out in some way every year, and responsible business owners will have forecasted for it well in advance. We can be sure that in all sectors, but particularly retail and hospitality, that business owners will be looking ahead to the end of the dark winter months when spending activity increases and tourism trade returns.
What’s important in the meantime is sticking to what you know, assessing your budgets early and often, and being meticulous about shopping around for your utilities.
To discuss your own situation please contact Stephen by Email: stephenmcconnell@bakertillymm.co.uk or Tel: 028 9032 3466.
This article first appeared in the Irish News on 17th January 2023.