Seasonal profit planning: Ensuring business stability all year round
The weather’s whims and the ever-changing economic climate make it a challenge to ensure business stability year-round. This is particularly true for rural and farming businesses, which, despite their inherent dependence on seasonality, need to continually adapt and prepare to face the future with confidence. From previous year’s account management and tax planning to forecasting future outlooks, let’s dive into how seasonal profit planning can help your business remain stable all year round.
A look back: Account management and tax planning for the previous year
We cannot plan for the future without understanding the past. The past year was a robust one for farmers and rural businesses, largely due to high crop prices and yields. There was also an interesting trend: businesses diversifying their offerings, especially into the tourism sector, reaped substantial benefits from tax reliefs and a surge in domestic tourism.
For instance, a farm branching out to offer agritourism experiences can make the most out of the financial incentives provided by the government while also attracting an audience eager to explore rural areas. It’s all about strategic diversification and making the most of the resources at your disposal.
Predicting the future: Future outlook and the impacts of weather
The upcoming year is looking promising, but not without its challenges. Weather-dependent businesses have reported mixed performances due to extreme heat affecting consumer spending habits. Farming, however, maintains a generally positive outlook, with favourable weather aiding crop growth and recent rainfalls easing the planting season.
One crucial point to consider is the potential impact of extreme weather on future practices. This year, the extreme heat could have disturbed the balance required for crop storage. Thankfully, any potential adverse effects were counterbalanced by increased prices. But what about next year or the year after that? Proactive thinking and readiness to adapt are paramount in navigating the world of unpredictable weather patterns.
Beyond waiting: Equipment lead times and vapital investment considerations Equipment lead times are another aspect of profit planning. By planning early, you can avoid the bottleneck and ensure you get the equipment you need when you need it.
Andrew Parrot, partner at Monahans, an Accountancy firm specialising in Rural Business and Landed Estates, highlights this “The opportunity to plan now rather than waiting until later in the year may be beneficial to combat the long lead times being experienced on certain pieces of farm equipment. It may still be possible to buy something smaller in a tighter timeframe but, for those looking to purchase more substantial equipment, this may prove more challenging. We’ve heard cases of certain clients waiting up to 12 months for a piece of equipment, so if there is something specific required, you’ll certainly have more chance of purchasing it now than you would later in the year.”
Cash flow: An essential element
While clients are currently reporting fewer cash flow challenges due to factors like government-subsidised payments, the landscape could shift when large tax bills based on strong profits from the previous year are due. Cash flow management, hence, remains an essential element of your overall financial planning.
The bottom line: The importance of planning
As the saying goes, “Failing to plan is planning to fail.” This sentiment holds in the business world, especially amidst fluctuating economic and weather conditions. A financial specialist can help you navigate the upcoming changes and integrate these forecasts into your forward planning.
Conclusion
Seasonal profit planning is not just a business strategy but a survival tactic in today’s volatile business climate. As we’ve seen, factors such as weather, tax changes, equipment lead times, and capital investment considerations all play crucial roles in this planning process. By analysing past performances, forecasting future possibilities, and proactively addressing potential challenges, you can ensure your business remains stable, profitable, and ready to face whatever the seasons may bring.
