By Michael Branniff, Business Services Partner at Baker Tilly Mooney Moore
After entering 2023 with a depressing economic outlook, the markets remain unsteady as we make our way through spring. Inflation is not on the downturn yet, overheads remain high for businesses right across the board, and the low supply of labour is a pressing concern.
Despite this, there is some optimism that the long-term economic outlook is brighter, which is welcome following a particularly precarious winter. While it would be foolish to predict too far in advance, it appears that energy costs have hit their peak and consumer confidence is on the up.
Businesses now need to find a balance between reacting to immediate challenges while also planning for the future. The cost-of-living crisis, war in Europe, Covid-19 support package repayments and a severe squeeze on household incomes and corporate balance sheets have not left us and should be built into budgets and forecasts for the years ahead.
Getting your staffing right is one of the best ways to plan ahead, yet staffing is the exact challenge that businesses right across Northern Ireland are facing. Be it hospitality, construction, engineering, or professional services, we are seeing massive constraints on talent and supply, and the attraction and retention of staff has become a major issue for the businesses we work with.
The competitive labour market is inflating salaries, and this wage war is beginning to harm some companies. Staff shortages are holding companies back from taking on more work and ultimately developing and expanding. Those businesses predominantly paying staff at the National Minimum and Living Wage levels are also preparing for the significant scheduled uplift in costs in April.
Looking ahead with this in mind, local business owners and managers are best placed to keep a steady head and invest time in making detailed projections. The positive outlook that is beginning to emerge will hopefully bring with it a boost in consumer confidence, but in the meantime, the basic principles of cashflow management and responsible accounting remain.
Preparing projections for two to three years in advance may seem unrealistic given that the direction of travel could change tomorrow, but it is an important exercise for two main reasons.
Firstly, accurate and long-term planning allows you to stave off any issues well in advance. We know that energy prices will remain relatively high compared to previous years next winter, therefore budgeting for what your business will experience in the next one, two, to three years will help you make better decisions.
Secondly, live accounts and projections will stand you in good stead if you do require additional support. Given the jumps in interest rates in the last six months, having a trail of complete accounts and projections will make it easier when in discussions with lenders.
Ultimately, it is when armed with reliable, up to date information that business owners make the best decisions. There is merit in experimenting with different long-term financial models and there is a wealth of bespoke advice and guidance out there for every sector should you require it.
To discuss any aspect in more detail contact Michael Branniff, Business Services Partner E: michaelbranniff@bakertillymm.co.uk T: 028 9032 3466
This article first appeared in the Irish News on 17th April 2023.