It’s November and 8 weeks to go before year end—what an eventful year! So big corporates involved in crafting corporate strategies—review of 2024 Strategic Plans vs Actual Performance and truth is it’s difficult to plan in a VUCAH Economy. Even at national level we have seen budget deficits forcing authorities to re craft budgets and seek additional resources. In this economy—incremental approaches the most ideal. Plan for short periods like 6 months—and then make adjustments on the road.
The purpose of the write up is more on the financial side—simplifying it for non-finance folks, and generally get an overview of what’s coming in 2025.
We first simplify our review by looking at 2 critical financial reports, The Profit and Loss (P&L) and the Balance Sheet. We can ignore the Cashflow Statement for now,
Covid Impact on Balance Sheets:
When I assisted several small to medium sized companies on strategic planning last year—The Covid-19 Impact was very much still alive on the Balance Sheets with some Debtors from as far back as 2020 still appearing. Some debtors simply closed shop during the pandemic period. Some were struggling to pay and the question became—to continue pursuing legal channels or write them off?
Similarly some had material creditors which they were struggling to pay as they too were adversely impacted by the pandemic. Yes Covid-19 now history but a deep analysis of many a balance sheet shows unresolved after-effects.
Climate Change Impact:
Unprecedented dwindling of water levels at Kariba directly emanating from Climate Change and the impact felt on operating costs—Energy costs up as companies invested in alternative energy. The impact felt industry wide jerking up costs of doing business. As if this was enough—joining the bandwagon—Elnino inspired drought during the 2023/2024 Agriculture season. National forex allocated to cereals imports further ballooning the trade deficit. Impact on disposable incomes and did the devaluation came as a surprise?
Non Compliance Penalties and Garnish Orders:
Struggling to balance the books and forced to sell products and services at economic sense forex rates, offloading goods onto the informal sector for survival and all sorts of financial management gymnastics. The result –garnishes from bank accounts further compounding the woes of the working capital position.
External Regulatory Changes:
Covid-19 After effects+ Climate Change+ Other conditions=less income(tax) available for the nation. Therefore triggering a volatile environment where survival strategies by individuals and the corporate sector attracting Statutory Instruments Regulations—some coming at short notice, some catching everyone by total surprise—further fuelling uncertainty. Companies adjust to a new environment—but not for long—and there is a big quake—and you have to adjust to the new reality. Essentially moving in cycles of uncertainty and constant adjustments and realignments.
So impact on income ((increased competition (some of it from smuggling of goods by the informal sector), low disposable incomes, fluid regulatory environments etc)) and on costs we have inflation+ Covid-19 After Effects+Climate Change+Other conditions such as increased cyber threats, thefts and others.
Hail the financial professionals helping in decision making to keep companies afloat. Cost containment Yes, but feed forward control strategies complex in 2024 and expected to be more complexar(sic) in 2025.
So in short this is the financial performance overview we get from the above analysis. Now in strategic planning we do not start from the Balance Sheet—in fact the financials come last—it’s the corporate activities, skills, systems and business models employed that will determine the success of organizations in 2025. They are later summarized in financial form.
And there are many approaches employed in strategic planning, however don’t forget to analyse the balance sheet….in most cases by the time you reach the balance sheet—you would have exhausted all the energy on reviews and brainstorming with fatigue inevitable.
