Why Budgeting for 2024 is Important for Your Financial Roadmap and Overall Growth
By Sarah SchiltzCFO
Late-night, horror, slasher movies on T.V. Zombies with missing body parts are crawling out of the ground and creepy clowns with sharp teeth are lurking in the sewers. Life-size skeletons, ghosts and goblins adorn nearly every house. It’s spooky season, and yet none of those things might scare you more than the idea of budgeting for the year 2024.
In the last quarter of the year assessing economic conditions, industry trends, and internal performance, middle market companies can make informed decisions about revenue and expense projections, and potentially explore alternative funding options if needed. This proactive approach enhances financial stability and operational efficiency and positions these companies to thrive in a rapidly changing business environment, ensuring they are well-prepared for the obstacles and opportunities in the year ahead.
2024 Budget Forecast: What to Consider
Economic Outlook and Industry Trends: Begin by assessing the broader economic outlook and industry-specific trends. These can impact your revenue and cost projections. It’s important to keep an eye on factors like inflation, interest rates, and changes in consumer behavior that might affect your business.
Sales and Revenue Projections: Estimate your sales and revenue for the upcoming year, considering factors like market demand, competition, and pricing strategies. Be conservative in your estimates to ensure you have a cushion for unexpected changes or emergencies. Small to middle market businesses are more prone to recessions, pandemics and other macroeconomic factors than larger organizations.
Expense Planning: Analyze your fixed and variable costs. Look for areas where you can cut expenses without hurting your core operations. Don’t forget to factor in potential cost increases due to inflation or regulatory changes.
Cash Flow Analysis: Review your historical financial data to identify patterns and trends. This can help you make more accurate revenue and expense projections; next, create a detailed cash flow statement to understand when you’ll have cash coming in and when you’ll need to pay bills.
Alternative Funding Options: Recognize that traditional financing sources such as bank loans or lines of credit may not always be readily available, especially considering that rates have risen significantly, and banks are tightening their lending requirements. We also can expect to see rates stay the same or even rise at the beginning of 2024. According to The Federal Reserve’s July Senior Loan Officer (SLO) Opinion Survey, “Heading into and during 2024, we can expect banks’ justifications for tightening underwriting standards to continue to hold based upon the uncertain “economic outlook and expected deterioration in collateral values and the credit quality of loans as reasons for expecting to tighten lending standards further over the remainder of 2023.”
Alternative funding options can provide flexible access to capital for growing businesses who might need diverse financing solutions for their specific needs. And unlike banks rigid regulations, alternative funding providers have the opportunity to be creative and adaptable with terms.
Strategic short-term planning for long-term outcomes: Don’t just focus on the immediate year. Consider your long-term financial goals and how this budget fits into your overall strategy. And ensure that you adhere to all legal and regulatory compliance requirements and reporting obligations related to your financial activities.
Budgeting is critical for middle market companies, allowing them to anticipate and plan for potential challenges, seize growth opportunities, and align resources with strategic goals. Consider seeking advice from financial experts, such as accountants, financial advisors, or consultants, to help you with budgeting and exploring alternative funding options.
Kompass Funding is a financial solutions partner offering four niche solutions: Kompass Accelerate, Kompass 24, Kompass Access and Kompass Lend. Their goal is to partner with growth-oriented companies and bridge financial gaps to help all stakeholders win by simplifying cash flow, covering payroll expenses, providing immediate funds for growth and minimizing time collecting payments.
