Blog Post Five - 2023 Q1 Checklist
Author: Mara Garcia, Forbes Council Member
The new year brings businesses new goals and lofty expectations. Before the calendar turns to 2023, however, business leaders and finance departments are tasked with creating a financial forecast and establishing a budget to meet their organization’s goals for the first quarter and onward.
Business growth starts at the financial level. As the CFO of Phonexa, I have firsthand experience devising thorough fiscal plans that outline expenses, estimated earnings growth and projected profits.
A strategically crafted fiscal plan is essential to sustaining a profitable business—especially when it comes to developing budgets and forecasts. Here are some actionable steps you can take when creating a budget and forecast for the first quarter of 2023.
Review Your Current Performance And Make Adjustments Where Needed
Before working on a budget and financial forecast for the first quarter of 2023, business leaders must first evaluate how the company performed in 2022. The first step is to review your company’s current year budget from Q1 to Q3—and going into Q4—to compare projections to results and identify areas where funds need to be allocated or cuts can be made in order to make the necessary adjustments.
When creating a budget, you have to account for real-time changes occurring within the company—expanding into new markets, downsizing or adding new employees, rolling out new products or services, and that’s just the tip of the iceberg. These changes must be communicated in the new budget to ensure an accurate fiscal plan.
The second step is to assess outside factors that can potentially impact your business—the current economic climate and rising interest rates should be front and center for any fiscal plan moving forward. This is a crucial step since these real-time outside factors may not have been taken into account when current budgets and forecasts were created during the previous year. Stay up to date with consumer trends and pending changes in regulations and policies to adjust to developments that may directly affect your company’s financials.
Identify Barriers To Accurate Sales Forecasting And How To Overcome Them
Preparing a fiscal plan for Q1—and the rest of the new year—can present a few challenges, including barriers to accurate sales forecasting. Miscommunication often contributes to inaccurate sales forecasts.
Accurate forecasting boils down to where information regarding streams of revenue comes from. For example, chief revenue officers (CROs) and chief operating officers (COOs) primarily focus on sales goals, but CFOs often need to remind them to look at the actual sales data and compare if those goals are being met and if sales forecasts need to be adjusted. Since a CRO or COO knows the ins and outs of the company’s sales objectives, they must be in constant communication with the CFO, sales and finance departments to ensure an accurate forecast moving forward.
The challenge of accurately forecasting sales is also exacerbated by failing to look back at the performance of previous quarters. Review your Q1 budget from 2022 and evaluate how close the company came to its sales forecast for that quarter. This will help you adjust accordingly.
Consider Using Different Forecasting Methods
Business leaders and finance department heads may fall into the habit of sticking to one forecasting method when preparing a fiscal plan. For some companies, this approach works just fine. From my experience, the best approach and methods of forecasting depend on the model and industry of the business.
It’s not a matter of how many methods are being used—it’s a matter of the quality of the method being used. If you decide to use more than one method, doing so allows you to compare and contrast forecasting models to determine which approach works best for your company.
If you’ve only used one forecasting method in previous years, review the performance for each quarter to assess how accurate those forecasts were. If those forecasts consistently miss the mark, it’s time to consider a different approach. On the other hand, if the forecasting method used in previous years works, stick with that approach. Pinpointing one or more effective methods will ultimately help you streamline your forecasting processes.
Final Thoughts
Forecasting requires taking a step back to get a view of the bigger picture moving forward. Business leaders and department heads must look at the past, present and future of the company when creating a budget and allocating resources for Q1 and the rest of 2023. Doing so will help you identify areas of business where cost-cutting measures can be implemented.
For instance, the aftereffects of the Covid pandemic are trickling into 2023 for many companies. If your company switched to a hybrid work model, you could reduce costs by moving into a smaller office. If your company is returning to a fully in-office work model, evaluate the investments made into technology (virtual desktop infrastructure, Zoom access, equipment for remote employees, etc.) and determine if any of these resources are still needed.
As countless business leaders learned at the height of the pandemic, there are unexpected factors that can greatly alter a company’s budgets and forecasts. When creating a budget and forecast for Q1—or any quarter for that matter—expect the best, but prepare for the worst.
