Available to Stream
Resilient Forecasting: 2024 Financial Strategy
Watch Now

5 Tips to Recession Proof Your Business Budget & Financial Forecast

November 28, 2022
Forecasting
Formula-free FP&A

Eliminate human error, increase confidence, and shave hours (or more) off your FP&A process.

Book a Demo

When you think of a business that’s recession proof, you probably imagine a company that provides the type of essential products people need regardless of the state of the economy. For example, grocery stores, healthcare businesses, and freight companies are all widely regarded as being recession proof. However, the truth is you don’t have to operate a need-oriented business to withstand times of hardship. With proper budgeting and forecasting, just about any business can protect itself against recession. Read on to discover Centage’s top five tips for safeguarding against surprises and giving your company the best shot at lasting success.

1. Remove the plugs from assumptions

If you want to recession proof your business, removing the plugs from your assumptions is one of the first and most crucial steps. To start, make sure all your assumptions are based on real data, facts, and conservatism. Failing to reevaluate assumptions in today’s uncertain economic environment can have serious consequences. In particular, companies need to look at factors that could have a significant effect on their bottom line, including customer wants and requirements, cost variables, capital availability, and issues with the supply chain. Be sure to test your beliefs regularly as circumstances can change on the ground rapidly. The goal is to ensure your base case is actually achievable should the economy start trending negatively. 

2. Ensure your base case is conservative

The key to surviving a recession is to have a conservative base case. Also known as sensitivities, cases provide a range of cash flow possibilities based on the assumptions you select, with the most probable one being known as the base case. Your base case should be chosen based on the most likely assumptions according to your team. While it’s tempting for companies to be overly optimistic about their circumstances, in the present economy this can have disastrous results for a business. Although the base case doesn’t have to be the most conservative scenario you’ve created, it should be less sanguine than your upside cases. For best results, take time to examine and define your inputs and assumptions and consult with other members of your team who may have unique insight into the situation. 

3. Revisit your forecast assumptions

Speaking of assumptions, revisiting your forecasted beliefs is crucial to surviving the downturn that’s likely to come. We recommend moving to a monthly and quarterly rolling budget. Moreover, you should measure any results you get against assumptions on a monthly basis and reexamine your forecasts at regular intervals. That way, you can make any necessary adjustments to your budget and strategy and ensure a path exists past your base case at every interval. 

Revisiting assumptions takes time and effort. Fortunately, automation can make it easier to implement a rolling forecast process successfully. A financial planning and analysis platform like Planning Maestro automates the process of updating spending and other data coming from multiple sources. Additionally, this kind of software can allow for easier collaboration with members of your team. The last thing you want are bottlenecks slowing down your process. 

4. Use actuals for your forecast

Actuals are an essential component of every forecast. If you want to achieve the most accurate, actionable results, make an effort to blend your most recent actuals with an up-to-date forecast or budget. Doing this will create a new rolling view of your forecasts. While a 12+12 is ideal for a wide view of the trends, 6 + 6 or 3 + 9 are the most helpful for forecasting what’s to come in the short term. The goal is to test your original assumptions and identify where you were correct and where things went sideways. Hopefully, you’ll be able to make more realistic assumptions and forecasts moving forward. 

5. Realize recession bottoms are a moving target

When it comes to economic realities, it’s easy to assume the worst is behind you and things are trending toward the positive. However, experts recommend waiting to see multiple periods of positivity before adjusting your forecast accordingly. After all, recessions can shift up or down on their way to finding the bottom, or trough in the business cycle that occurs when a recession ends and the economy starts to rebound. The idea is to ensure the bottom is truly within your sights before you start going too high with your assumptions

The challenges of a fast-moving business environment, coupled with today’s volatile economic climate, mean that companies have to think ahead if they hope to survive and thrive. The good news is that Planning Maestro offers the tools and insights you need to see what’s coming. A sophisticated financial planning and analysis (FP&A) software, Planning Maestro helps you achieve better budgeting and forecasting. Test various scenarios, boost budgeting accuracy, detect problems earlier, and set goals you can achieve. As a bonus, you can easily share and exchange data with other members of your team. The end result is that everyone gets on the same page faster. Request a quote today and discover what Planning Maestro can do for your business.

Centage provides modern FP&A software solutions that empower Finance teams to lead the way to a stronger, more agile business. Our cloud platform, Planning Maestro, makes sophisticated budgeting, planning, and forecasting easy and accessible. Intuitive automation accelerates workflows and improves accuracy, enabling Finance leaders to deliver reliable information and meaningful insights at the speed of today’s business. For more information on how to modernize your FP&A process, view our product demonstration video, or call 800-366-5111.

  • Error message label
  • Error message label
  • Error message label
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Stay in the loop!

Sign up for our newsletter to stay up to date with everything Centage.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Latest posts

Keep reading...

Interviews, tips, guides, industry best practices, and news.

View all Resources