The slowing of the growing season: Time to reset your financial outlook

An artistic illustration of a laptop computer.
Editor's Note

This article was sponsored by Numbercrunch.

Autumn is a season of bounty and abundance as crops and fruits are gathered and the landscape is ablaze with colour. At the same time it also symbolizes decline as temperatures cool and daylight shortens. Autumn marks the end of the growing season, but yet it is also the most popular season! I am pulling some parallels from autumn and the current economic outlook. Although we may be facing the end (or slowing) of the growing season from an economic outlook perspective, what we personally experience in relation to our experience with this slower growth may actually feel much better than we expect.

I’d like to encourage and empower you to make the best of the rest of this year by resetting your own financial outlook for 2022/2023. Here is a quick cheat sheet for business owners to get back in the game after some personal downtime.

  1. Take a look at year-to-date results compared to last year. Data is powerful and very grounding. Most entrepreneurs think they know how they are doing, but are often surprised when we show them the numbers. By looking at the numbers now you can make some start/stop/continue decisions that can impact the last quarterly results. (Pro tip: Generate a Profit and Loss Year To Date report up to last month and compare it to the same period last year.)
  2. Compare year-to-date results to your annual plan. If you took our recommendation to lay out a 2022 Financial roadmap and projections then you are in an excellent position to measure your performance and more importantly, make any changes that can impact the result. (Pro tip: If you had uploaded your annual budget into your accounting software this is a simple Budget vs Actual report. If you didn’t create or upload your budget then put this on your 2023 financial to-do list.)
  3. Check your bottom line. Is it a positive (profitable) number or is your business running at a loss? The biggest change in the tech sector is the funding forecast. Venture funding declined in the second quarter and deal counts are also down. The pandemic boom is at an end now, which is going to be felt by many who have grown accustomed to heightened valuations and bountiful investments. This is where I insert the predictable CFO-style recommendation to go back to the business fundamentals and stabilize spend to course correct to profitability as soon as is reasonably possible with the support of current investors/lenders. (Pro tip: Review the Year To Date Profit and Loss by month and see if the bottom line is trending positively over time.)
  4. Revisit your assumptions. The headlines are filling up with CEOs admitting they miscalculated their growth assumptions. To their defense, most CEOs believe they can sustain growth rates. But what if growth is flat? What if there is a temporary decline for a quarter or two? By thinking through these nuances and measuring the financial implications you’ll be ready and may deploy efforts that increase the odds of material impacts. It is likely the assumptions you set 6 months ago are now a little off. (Pro tip: Measure historical growth trends in $ not just % and consider both in the current climate context when forecasting the next few quarters.)
  5. Forecast out to next year end. Now that you’ve taken pause of your financial situation, you are in a great place to extend your financial road map out to the end of 2023. You will still have time before year end to finalize your 2023 budget, but now is a great time to create a quick draft that will keep you on track. (Pro tip: Use your Profit and Loss layout for budgets for easy software uploading. If your Profit and Loss layout is not optimized by department then now is the time to upgrade your accounting support.)

If you need help with any of the above, give us a call. Our team of CFOs, Controllers and Bookkeepers work in teams to provide you with the right mix of financial skills and experience to support your entrepreneurial ambitions.