How Financial Forecasting Helps NZ SMEs Manage Uncertainty

Let’s face it: predicting the future can feel like trying to catch a slippery eel in the middle of a rainstorm. It’s tricky, messy, and sometimes downright frustrating.

But, as business owners and management teams, we know that forecasting is not just a necessary evil; it’s a critical tool in navigating the choppy waters of today’s economic environment and gets us from chaos to clarity.

At Andersen, we understand the unique challenges faced by SMEs in our market, especially as they grapple with an ever-evolving macroeconomic landscape and global market conditions.

In the current climate, New Zealand SMEs are dealing with a myriad of uncertainties. From fluctuating exchange rates impacting the New Zealand dollar to changing trade tariffs and the ongoing implications of global supply chain disruptions, businesses are constantly being pushed to adapt and pivot. It’s in this context that financial forecasting becomes not just important, but indispensable.

Understanding the Role of Financial Forecasting

Financial forecasting allows businesses to anticipate future financial conditions and performance. It involves the use of historical data, market trends, and various economic indicators to predict future revenue, expenses, and capital needs. But more than just predicting numbers, forecasting enables businesses to model different scenarios, helping them to prepare for a range of possible futures.

For SMEs in New Zealand, this can mean the difference between thriving and merely surviving. By leveraging forecasting, businesses can better understand the potential impacts of changes in trading conditions, tariffs, and exchange rates. This understanding allows them to make informed decisions, allocate resources more efficiently, and ultimately, enhance their resilience against external shocks.

One of the most powerful aspects of financial forecasting is its ability to model different scenarios. This involves adjusting variables to see how changes in one area might affect the overall business. For example, how would a sudden increase in tariffs impact your cost structure? What if the New Zealand dollar strengthens or weakens? By exploring these "what-if" scenarios, businesses can develop strategies to mitigate risks and seize opportunities.

Forecasting is not only used to track and monitor business performance but also when testing the feasibility of a project, changing strategy, or modelling a new lending facility for growth or expansion. It’s equally crucial when participating in an acquisition or divestment process. These activities require a deep understanding of potential financial outcomes, and forecasting provides the insights needed to make strategic decisions with confidence. Not even mentioning that our financial models can provide you with an estimate of the value of your business, using our valuations integrated modules. 

Tailored Solutions and Market Trends

In response to the current economic climate, businesses globally are adopting more sophisticated forecasting and scenario planning tools. Companies are increasingly relying on technology to provide real-time data and insights, enabling them to react swiftly to changes. Simplified dashboards are becoming a staple, allowing management teams to monitor and analyse information efficiently without being overwhelmed by data.

At Andersen New Zealand, we align with these market trends by offering solutions that cater to a wide range of clients and budgets. Our suite of forecasting tools includes daily to weekly cashflow tools and spotlight forecasting, providing clarity and insights with great visuals. Our sophisticated corporate finance modelling solutions, such Modano, allows for deep, three-way forecasts used by private equity teams, that integrate income statements, balance sheets, and cash flow statements, providing a comprehensive view of your financial future. These tools are complemented by simplified dashboards that present key metrics in an accessible format, ensuring that both business owners and management teams can make sense of the data quickly and effectively.

The Continuous Cycle of Forecasting and Reforecasting

Forecasting is not a one-time activity; it’s a continuous process. In a volatile environment, businesses need to regularly revisit and update their forecasts to reflect new data and insights. This rolling forecast approach allows for ongoing adjustments, ensuring that businesses remain agile and responsive to change.

At Andersen, we emphasize the importance of monthly reforecast exercises. By continuously adjusting expectations and plans, businesses can stay ahead of the curve and maintain a proactive stance in managing uncertainty. Our tools and expertise support this dynamic approach, enabling businesses to track performance and make data-driven decisions with confidence.

Final Thoughts

In today’s unpredictable world, financial forecasting is more than just a tool; it’s a strategic imperative. For New Zealand SMEs, the ability to anticipate and adapt to change is crucial for sustained success.

At Andersen, we are committed to supporting you with a range of forecasting tools and the expertise of our professional yet grounded corporate finance team. We understand the unique challenges you face, and we’re here to help you navigate them with confidence. 

Let's start with a conversation - reach out to our team.

Author - Jonathan Kogan