By adapting your company’s financial plan to changing economic conditions, you’ll be better prepared for… well, for anything. Read Online Accounting Tips’s new guide to find out which macroeconomic indicators you need to consider when budgeting.
Accounting is accrual profession. Being an accountant is taxing. However, when you have a good resource that breaks it all down for you, you can really Excel at those financial projections.
Online Accounting Tips has recently published a comprehensive guide titled "The Impact Of Economic Indicators On Budgeting And Forecasting." It describes the key macroeconomic indicators reflecting the current state of the economy, such as the inflation rate, GDP growth, and unemployment rate, and explains how changes in economic conditions should impact your budgeting and financial forecasting. Read on to find out which three key factors you should account for when creating a financial plan for your company. Or you can read the full guide at https://onlineaccountingtips.com/the-impact-of-economic-indicators-on-budgeting-and-forecasting/
In a recent survey by Business.org, 92% of small business owners reported dealing with rising costs during the high inflation period and supply chain shortages of the 2020 pandemic. In 2023, inflation remains one of the key challenges faced by small businesses. According to Online Accounting Tips, you can use indicators like the consumer price index (CPI) or the producer price index (PPI) to predict the potential impact of price fluctuations on your revenues and expenses. For example, you may need to allocate more funds to specific cost categories, such as materials, labor, or debt servicing, to accommodate inflation-induced cost increases.
A key macroeconomic indicator that you must incorporate into your financial forecasts if your company trades internationally is the exchange rate. As the domestic currency depreciates, the cost of imported goods increases, and you may even need to consider changing suppliers or renegotiating contract terms. Online Accounting Tips offers two hedging strategies you can use to mitigate exchange rate risk:
The unemployment rate is another factor you should consider. A high unemployment rate, which typically reflects an economic downturn, negatively affects disposable income and consumer confidence, so your forecasts may need to be adjusted accordingly. Here's how it may affect your revenues and costs:
Here are a few other factors that may influence your financial projections:
Online Accounting Tips also emphasizes the importance of staying informed about the latest government policy changes, in particular those related to taxation, economic stimulus measures, and regulatory compliance, as these can also influence your business’s bottom line. Remember - a fine is a tax for doing wrong and a tax is a fine for doing well. By staying up-to-date with government policies, you'll avoid the former and minimize the latter.
Read Online Accounting Tips's full guide to learn more about the other factors you can use to improve your financial forecasts.
Created for small business owners and individuals interested in accounting, Online Accounting Tips publishes expert guides covering various aspects of financial planning and accounting. You can access a wide range of detailed tutorials on bookkeeping, financial statements, budgeting, tax planning, and other topics at https://onlineaccountingtips.com/
