By Annie Makoff MembersHow to prepare for the economic volatility ahead25 Jan 2023 Here are the critical planning priorities to survive and thrive in 2023.2023 is going to be another volatile year in economic terms. Ernst & Young recently warned that the UK’s recession could be ‘twice as bad’ as initially predicted, amidst a backdrop of decreased government support, high business costs and increased fuel bills.January is already a notoriously busy time for accountants thanks to tax deadlines and last-minute tax requests from clients, along with the usual post-Christmas admin rush. Many will also be thinking about budget allocations for the next fiscal year as well as considering key planning priorities.Planning then, whether it’s around forecasting, cash flow or business strategies, is going to be more important than ever.Accountancy firms may wish to consider:the continued impact of fuel costs and rising business costs on cash flowworkforce planning (including retention and recruitment as well as engagement strategies)available business grantsrecession-proof business planningnational minimum wageimportant dates for business calendars: tax, payroll and VAT compliance deadlines, bank holidays, legislative changes.To this end, three accountancy firms shared their critical planning priorities for the year ahead and beyond.Businesses need to prioritise cash flow management and credit controlDavid Herd, group director, Champion AccountantsCash will be king in 2023, meaning businesses must keep a close eye on cash flow projections and forecast effectively. Credit control and cash management are critical in every business and even more so during an economic downturn.The ability to collect debts and, where possible, pass increased costs to clients – in a sustainable manner – will be key to success and survival. Many shy away from approaching clients and suppliers for more favourable terms, but these conversations must take place as a few late payers can quickly spiral – and at a time of incredibly high inflation, many businesses cannot afford double-digit interest rates on business loans and alternative finance. Business owners should also have their finger on the pulse of current affairs, with a war in Ukraine, Brexit and ministerial changes affecting multiple sectors, from rising mortgage interest rates for private landlords, increases to the cost of materials for manufacturers, and rocketing overheads for energy-intensive sectors. Businesses must remain agile, be willing to change and adapt – often at short notice – and focus on their people, as today’s war for talent threatens stability.Verdict: Cashflow projections, effective forecasting and credit control are particularly important during an economic downturn, as are skilled employees.Retention and recruitment are at the heart of our 2023 business strategySimon Massey, managing partner, MenziesThe backbone of our business strategy this year is to ensure we retain and recruit quality talent. This applies at all levels; whether it’s recruiting apprentices to train and move through the organisation, or attracting the high-level, experienced players that will make an impact from the top down.A strong team at all levels will ensure that day-to-day operations run smoothly and enable the business to achieve its growth potential. It’s particularly important in today’s climate, as other businesses will also be looking to strengthen their teams.As a service-driven organisation our people are everything, and we are dedicated to creating a workspace where our employees feel valued. Initiatives such as our Better Place to Work programme help to keep our staff motivated and demonstrate that we are a caring employer – this is something we’re proud of.Additionally, for a business to be resilient against economic uncertainty, it’s critical to have robust plans and strong cash flow. Where businesses trade internationally, strategies that are designed to improve efficiency and standardise processes are essential.Verdict: Retaining and recruiting top talent, along with creating and implementing robust plans and strong cash flow, will be critical.Plan cash flow for Q1 and don’t lose sight of the medium and long termBen Brookes, Partner, WellersPlanning should include headcount planning, sales and revenue predictions, costs and historical data trends. Projections will give a good indication of the overall health of the business, which is critical to knowing whether they need to make savings or if they can afford to invest. Of course, things change, and forecasts should always be living, breathing documents that are consulted regularly and updated accordingly.Cash flow planning will be particularly important for Q1, especially if analysts are right and the UK economy rides a wave of recession for the first half of the year. Whilst it’s predicted to be a snap recession, rather than an extended period of decline, it’s still expected to hit deep.With the potential for reduced sales whilst consumers tighten their belts, business owners need to make sure they can still service their costs. A business cannot survive long with poor cash flow management.The medium and long-term will look more at how a business can return to growth, instead of battening down the hatches. Some industries may feel the strains of the recession for longer, so won’t be able to commit to growth quite so soon, but for others it will be about growth and investment.Verdict: Cash flow planning will be important for Q1, while a return-to-growth plan should be prioritised for the medium-to-long-term in businesses that are doing well.Reduce debt in the short term and prepare forecasts for long-term growthAndrew Moss, corporate partner, DSG Chartered AccountantsBusiness owners need to ensure the organisation can deal with unexpected bumps in the road, whether it’s a drop in sales, a bad debt, or rising costs as well as having sufficient headroom in cash or facilities, so planning is key.Short term: it’s all about profitability and cash management. Focus on cash collection and reducing debt as interest rates potentially peak.Medium term: we advise businesses to be aware ofworking capital managementsales pipeline and ordersstrong customer servicecontinuity of supply and material price managementmanaging power costsprotecting marginsretention of employees.Long term: This is where you plan for profitable growth. Prepare forecasts to determine any funding requirements. Ensure personal affairs are in order and can be managed in conjunction with the income the business can generate.We advise clients to ensure they have up-to-date and accurate management information that tells them how the business is performing, whilst also ensuring they are ready to react to any adverse trends in the figures. Maintaining flexibility is incredibly important, as this will allow business owners to quickly make changes to reduce and manage costs, or negotiate price increases with customers.Verdict: Focus on debt reduction for the short term and prepare forecasts and funding requirements for the long term. Annie Makoff is a freelance journalist and editor.