What’s the outlook for 2024?

| Categories: Business Tips , economic forecast , Future Financial Planning , inflation

Blog by Fuel Accountants


We have for you, the good, the bad, and the ugly (the good is at the end so you leave on a positive note!!)

We’ve been through so much turmoil in the last 3 years.  So what is the forecast for this year?  While we don’t have a crystal ball, here are Peter’s predictions for 2024:

  1. Inflation is going to continue to be a problem:  Wage growth is going to continue - probably stronger than in the past few years as the population continues to struggle with the ravages of increases in the cost of basics such as food and housing.  Inflation is also being driven by the increasing costs of climate change policies, unrestrained government spending and interest on government debt (which is fast approaching catastrophic levels).  Governments are manipulating the official CPI numbers, so real inflation is well above the published numbers.
  2. Interest rates will not come down much:  While I expect a small easing of rates in the short term, rates won’t come down to anywhere near what we’ve seen in the past several years (which have been at unusually low levels), and may well rise again if inflation increases (which is still a possibility).  A return to more normal rates is more likely.  Banks are likely to tighten their lending criteria as well.  This may mean that many loans (especially business loans) may not be renewed and lines of credit and overdraft facilities may be revoked (often with as little as 14 days notice).  Governments are going to have to start offering higher rates to sell bonds which will keep interest rates high as most lending rates are based on government bond interest rates.
  3. Governments will continue to run major deficits: It seems that none of our current governments know how to cut spending in any way.  Our populations are demanding more socialized services, and our existing entitlements are woefully underfunded.  Debt servicing costs will explode due to the higher interest rates.  All of this will make it impossible to return our government budgets to surplus or breakeven positions anytime soon.  Even if we are fortunate to elect a more fiscally conservative government, the hole is so large they will not be able to make meaningful changes quickly.
  4. Governments are going to look for more ways to “tax the rich": While wholesale tax increases are unlikely, mostly due to how unpopular they are with the populace, taxes on the so-called “wealthy” are likely to increase.  Unfortunately business owners are lumped in with this segment, so it is likely that policy and tax changes will increase the cost of running a business.
  5. AI and robotics will continue to improve and start to disrupt: We have seen massive improvements in Artificial Intelligence in the last year and more will come.  The world of robotics has hit new highs with more versatile, intelligent and humanoid general purpose bots hitting the market.  While it is still very early days, expect to see major breakthroughs in this space this year and lots of new tools hitting the market that will disrupt many sectors.  It seems that very few roles are truly safe.
  6. General economic and business uncertainty will continue:  When there is uncertainty in the economic outlook in general or the business space specifically, everyone cuts back spending.  We will continue to see businesses struggle.  Many more businesses will fail - from small businesses that were left weak after the pandemic to large businesses that are overleveraged and can no longer manage debt repayments or refinance in this new climate.

So unfortunately this is not a totally rosy picture.  I don’t think that we need to be totally scared - with every crisis many opportunities are also created. Businesses that are prepared and healthy can not only survive, but also thrive, in this climate.

And you were waiting for the “good news?” Ok, here it is... 

How to prepare for and thrive in this tough climate…

Here are some opportunities:

  1. Increase your profit margins: People know about inflation, so they are expecting to pay more. They understand that the cost of doing business has increased. Thus, you should consider an increase to your pricing. 
  2. You need to ruthlessly focus on profitability: Go back and review your expense budgets. Remove or defer discretionary spending. Create enough buffer to survive the loss of a large customer or any other major event that is likely in this climate.
  3. Reduce or Avoid debt: With the high cost of borrowing and the tightening financial outlook, banks are less likely to lend and risk premiums (interest rates) might increase.  This will make it hard to borrow or renew existing debt.  If your business is reliant on rolling over current debt or getting new debt then you should work out how you can minimize this.  Pay off as much debt as you can.
  4. Manage your cash: Cash flow is king, especially in uncertain times.  Building a stockpile of cash can help you through a rough month or and give you breathing room during changing and challenging times.
  5. Stay on top of technology changes:  You need to stay aware of all new advances in AI that could affect your industry.  You might start playing with AI new tools to see how they may assist your business.

Final Thoughts…

Our Profit First Cash Management System (PFCMS) is designed to help you protect and even thrive, even in economic challenge times. If you are not currently implementing our PFCMS then please reach out to us now to discuss how you can prepare your business and come out on top!!

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