Even the most experienced business owner can sometimes be swung off course by market volatility, economic shifts and global events that impact the bottom line. Today, businesses are facing several unique and cascading headwinds that make forecasting, budgeting and planning difficult. Below, we review some of those challenges and provide steps for approaching your business budget with them in mind.


According to the U.S. Chamber of Commerce, inflation is a top concern for 54% of small business owners. When considering inflation in your business budget, conduct a spending and expense review to see how much you are paying for goods and services. Are there sensible ways to reduce costs? If yes, plan to implement those cost reductions throughout the year, and factor those into your expense projections. Be sure to keep an eye on shipping and material costs, and closely analyze every non-essential dollar coming out of your bottom line.

Now is also a great time to ensure you are optimizing processes and embracing technology to further reduce costs without losing the value of your good or service. Review your accounts receivable and payable processes and make a plan to transition to digital wherever possible.

Inflation also lowers the value of the dollar as it simultaneously increases the value of assets, so if you have high debt, inflation can make it worthwhile to pay it back faster. For instance, your real estate loan payment may remain the same, but the value of your property may have increased, so you gain from inflation. Similarly, inflation can open up opportunities to evaluate your pricing structures – as the economy collectively raises prices, you can, too.

Peaking interest rates

Interest rates were in stasis for a long while, but times have changed, and the past year has seen some significant increases.

If you need business financing, it may be smart to consult with your financial team to find creative solutions with rates peaking in 2023. You can also consult with your financial institution to determine the cost/benefit of taking out business loans now or waiting a few months to see how rates are impacted. The forecast for interest rates in 2024 is a stabilization at 5+%.

Consumer confidence can take a hit when interest rates rise, so businesses that rely on direct sales or services should include contingencies in their business budget while rates continue to experience volatility.

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Supply chain disruptions

The breakdowns of our global supply chains are impacting businesses and consumers around the world with slowed manufacturing and delayed shipping. We continue to hear about the impacts to businesses with increases in shipping costs, storage expenses, delivery delays and logistics snafus. However, these challenges are starting to wane.

As you build your budget, keep these challenges in mind and implement a budget amount range with contingency plans baked in. Outline your variable and fixed costs and set some “red flag” moments that cue you to perform a budget check throughout the year. For instance, if you can’t access the materials you need or you lose a big client, return to your budget and course correct as needed.

Before setting your budget, also brainstorm cost-cutting measures that can be quickly implemented if revenue doesn’t match expectations. This exercise can help you manage headwinds as they come, whether its logistics, materials or something else impacting your bottom line.

Talk with your financial professional to consider financing or working capital solutions in the event supply chain issues affect your business growth.

Talent retention and recruitment

Whether you’re looking to grow or need talent to keep your lights on, the shifting labor market can impact your bottom line. Here are some financial considerations when it comes to maintaining your workforce:

  • Invest in and strengthen your current team – Talent development, wage reviews, internal promotions and hires can all help retain your current workforce. Keeping your current team in place can build stability in your budget.
  • Recognize that hiring costs have increased – Average wages for new hires have increased, so be sure to anticipate not only more expensive new hires, but questions about raises and promotions from your current team. Focus on benefits to make up any difference in salary or hourly pay that they may be seeing in market, which can mitigate some of the impacts on your budget.
  • Flexible work environments – Gone are the days of in-person work being expected. Now, many candidates expect flexible work environments, whether through working from home or a hybrid home-office schedule. Embrace the change and consider how the work from home shift can help you cut costs if your industry allows for virtual or asynchronous work.
  • Evaluate your workforce like any other budget contingency – Your workforce budget is not one you can control and can have major impact on revenue. Be shrewd in your resourcing forecasts knowing you may not have the upper hand in resignations and new hire negotiations.

Building your business budget is a nuanced undertaking in the best of times. In a season of headwinds, it can be much more difficult to forecast income, expenses and the impacts of the market. The good news? You don’t have to do this alone. Find a bank you trust to work with you on your financial plan.

If you are interested in learning more about how UMB can help your business, visit our website.

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