Uncertain times: A guide to forecasting, budgeting, and scenario planning 

A practical guide for business owners and directors

Running a business has never been straightforward, but many owners and directors would agree that the current economic environment feels particularly uncertain. Rising costs, pressure on margins, changing customer behaviour and wider economic instability are forcing businesses to make decisions with less clarity than they would like.

In times like these, financial planning can feel overwhelming. Traditional budgets can quickly become outdated, forecasts may feel unreliable, and it can be tempting to focus purely on short-term survival rather than long-term sustainability.

As finance professionals who have spent many years supporting UK businesses through periods of growth, downturn and disruption, we’ve seen first-hand that the businesses that cope best are not those that try to predict the future perfectly, but those that prepare for a range of possible outcomes.

This is where forecasting, budgeting and scenario planning come into their own.

Why financial planning matters more in uncertain times

At its core, financial planning is about understanding what might happen to your business and making informed decisions today.

In stable conditions, many businesses rely on an annual budget and occasional updates. In uncertain times, that approach is rarely sufficient. Unexpected changes (such as sudden cost increases, slower sales, or changes in borrowing conditions) can quickly render a static plan obsolete.

Good financial planning does not remove uncertainty, but it gives you visibility, control and options. It allows you to:

• Understand your cash position and future funding needs

• Identify pressure points before they become problems

• Make decisions with confidence rather than instinct

• React quickly when circumstances change

For owner-managed businesses and SMEs, this can make the difference between feeling constantly on the back foot and feeling prepared.

Forecasting: looking ahead with realism

Forecasting is the process of estimating what your business’s financial performance might look like in the future, based on current information and realistic assumptions.

For most SMEs, this will include forecasts for:

• Revenue and gross margin

• Overheads and operating costs

• Cash flow (money coming in and going out)

A common misconception is that a forecast needs to be “right” to be useful. In reality, a forecast is a working model, not a promise.

The most effective forecasts are:

• Based on up-to-date data, often from management accounts

• Regularly reviewed and updated, rather than set once a year

• Focused on key drivers, such as sales volumes, pricing and costs

Rolling forecasts, where you continually forecast 12 months (or more) ahead, are particularly valuable in uncertain conditions. They allow you to see emerging issues early and adjust course before problems escalate.

This is an area where many businesses benefit from external support, especially when forecasts need to be linked to cash flow or funding requirements.

Budgeting: setting a framework, not a rule book

A budget is a plan for how you intend to run your business, how much you expect to earn, spend, and retain over a defined period.

In uncertain times, budgets often fail because they are treated as fixed targets rather than flexible tools. When reality diverges from the budget (as it inevitably will), they can be ignored altogether.

A more effective approach is to treat your budget as:

• A baseline plan, based on realistic assumptions

• A reference point for monitoring performance

• A tool for understanding where change is happening

Some businesses also benefit from reviewing costs using a “zero-based” mindset. Questioning whether each major cost is still necessary and delivering value, rather than simply rolling forward last year’s spend.

Budgeting works best when it is closely linked to forecasting and management accounts, allowing you to compare expectations to actual performance and respond quickly.

Scenario planning: preparing for what might happen

Scenario planning takes forecasting one step further. Instead of asking “What do we think will happen?”, it asks:

“What could happen — and how would we respond?”

Scenario planning involves modelling different versions of the future, typically including:

• A base case (what you expect to happen if things broadly continue as they are)

• A best-case scenario (if things go better than expected)

• A worst-case scenario (if conditions deteriorate)

For each scenario, you consider the financial impact on profitability, cash flow and viability, and what actions you would take in response.

Importantly, scenario planning is not about pessimism. It is about being prepared. When you have already thought through your response to adverse scenarios, decision-making becomes faster and calmer.

For example, scenario planning can help answer questions such as:

• How much of a drop in sales can we absorb before cash becomes tight?

• What costs could we reduce quickly if needed?

• What level of borrowing would we require in a downturn?

• Is now the right time to hire, invest or expand?

This type of analysis relies on accurate management information and well-constructed financial models — areas where professional support can add significant value.

Cash flow: the non-negotiable priority

In uncertain times, cash flow matters more than profit.

A profitable business can still fail if it runs out of cash. Understanding when cash will be received and when it must be paid out is critical.

Short-term cash flow forecasting (often over 13 weeks) can be particularly powerful. It provides visibility over:

• Upcoming pressure points

• Funding gaps

• The timing of key decisions

For many SMEs, cash flow forecasting is one of the most valuable services we provide, as it brings clarity and reassurance during periods of volatility.

Practical tips you can act on now

To bring this to life, here are some practical steps business owners and directors can take:

1. Improve the quality of your management accounts

2. Move away from static annual plans

3. Focus on key drivers

4. Build at least three scenarios

5. Prioritise cash flow visibility

6. Don’t do it alone

Independent input can challenge assumptions and improve decision-making.

How Halliday Styan Chartered Accountants can help

Supporting businesses through uncertain conditions is a core part of what we do. We work with owner-managed businesses and SMEs to provide:

• Clear, practical management accounts

• Robust forecasting and cash flow modelling

• Budgeting support tailored to your business

• Scenario planning and stress testing to support confident decisions

Our approach is calm, collaborative and focused on helping you understand your numbers, not overwhelming you with complexity.

Final thoughts

Uncertainty is now a permanent feature of the business landscape. While none of us can control the external environment, we can control how well prepared we are.

Forecasting, budgeting and scenario planning are not just finance exercises, they are tools for building resilience, confidence and clarity.

If you would like to explore how better financial planning could support your business, we would be happy to have an initial conversation and discuss how we can help you put the right frameworks in place.