4th Quarter Planning and New Year Budgeting

A red pencil with the words 4th Quarter written on a paper.

For companies that operate on a calendar year, October marks the beginning of the 4th Quarter and a time when the performance of the previous three quarters is analyzed to project next year’s budgets.

Retail Projections

For retailers, October marks the beginning of the holiday season and a time when consumers open their wallets in search of the perfect gifts for friends and loved ones. According to the National Retail Federation (NRF),  19% of the annual retail revenue is generated in the 4th quarter of the year.

Over the last decade, consumers have been kicking off their holiday shopping early, beginning in late October and early November, to spread their budgets and avoid last-minute stress. In 2021, nearly 180 million Americans shopped during the Thanksgiving weekend, spending an average of $301.27. In 2022, according to a recent poll, 45% of holiday shoppers say they will browse and buy in stores on Black Friday this year.

For many consumers, Thanksgiving weekend shopping is not just about the sales — it’s a tradition or something to do with friends and family over the holiday season. So despite the threat of a COVID surge of new variants during the colder months, many consumers said they might be more eager to embrace pre-pandemic norms and ways of celebrating.

An NRF survey of 2,000 consumers in late September found that 62% of holiday shoppers agree that spending on holiday gifts and celebrations is important. And they will do what they need to, even cutting back in other areas, so their loved ones can celebrate like they always do.

According to NRF’s latest consumer survey, 44% of holiday shoppers say it’s better to purchase gifts and other seasonal items now because they believe inflation will continue to impact prices later in the year. Another 31% think buying items now is best because the deals won’t get any better. Higher prices and inflation are top of mind for holiday shoppers.

According to a report by McKinsey & Company, two years into the pandemic, people across the country have discovered that they like shopping online, but they’re also going back to brick-and-mortar stores. They’re venturing out of their homes again but continue spending money on home improvement. And—in what could be a boon or bane for manufacturers and retailers—today’s consumers are quite willing to abandon their once-preferred brands in favor of new ones that offer value or novelty.

In the early months of 2022, amid record inflation, US consumers continued to open their wallets. US inflation grew to nearly 8.5 percent in March 2022, with the May 2021 to March 2022 period showing the highest inflation in a decade. Yet, US consumers spent 18 percent more in March 2022 than they did two years earlier, and 12 percent more than they were forecast to spend based on the pre-COVID-19 trajectory.

Supply chain disruptions are still a big problem for retailers, and they have implemented mitigation strategies. For example, many retailers decided to move up their holiday shipping season and brought products in earlier than normal to ensure they would have products available for consumers. Some also shifted to the East Coast/Gulf Coast ports to avoid potential disruptions on the West Coast because of the ongoing labor contract negotiations.

Future Planning

Retailers and businesses of all types are very cognizant of the times in which we live and the possibility of a recession. Finishing the fourth quarter on a high note is important, but so is planning for the future.

Set S.M.A.R.T. financial goals by implementing the following:

  • Specific: Lay out the details of your goals so you have a clear measurement to see when you reach the goal. For example, set a specific sales dollar amount you want to achieve before the end of the year.
  • Measurable: Generic, unmeasurable goals make it hard to see if you achieved the desired results. Instead of saying that your goal is to increase sales, set a plan to boost sales by 2% compared to the previous quarter.
  • Attainable: Choose a goal that is attainable within a three-month. It is good to reach for the stars, but don’t shoot so high that you face failure.
  • Realistic: Also, think about realistic changes that can be made in your company.
  • Timely: A three-month goal is an excellent timeframe. It gives you enough time to work on the goal without making the deadline so far out that it will get kicked down the road.

Here are a few questions that you can ask as you are evaluating your goals and success:

  • Are you on track to reach your target sales numbers for the year? If not, why?
  • What are the best activities that are bringing in more sales and revenue?
  • Where are the categories that are cutting into your profits?
  • Do you have an effective accounting system in place to show current financial reports?
  • What is working? What isn’t working?
  • Is your marketing plan bringing in the customers that you anticipated?
  • How can you leverage the holiday season to boost your sales?

The fourth quarter is also a great time to take advantage of Section 179 of the U.S. Internal Revenue Code, which provides an immediate expense deduction that business owners can take for purchases of depreciable business equipment instead of capitalizing and depreciating the asset over a period of time. The Section 179 deduction can be taken if the piece of equipment is purchased or financed, and the full amount of the purchase price is eligible for the deduction.

  • Section 179 of the IRC allows businesses to take an immediate deduction for business expenses related to depreciable assets such as equipment, vehicles, and software.
  • This deduction allows businesses to lower their current-year tax liability rather than capitalizing an asset and depreciating it over time in future tax years.
  • Section 179 is limited to a maximum deduction of $1,080,000 and a value of the property purchased to $2,700,000 for the year 2022.

Business Finance Corporation (BFC) can help you with your Fourth Quarter Planning. We can turn your accounts receivables into instant cash for those end-of-the-year equipment purchases, IRS deposits, employee holiday bonuses, or any other general expense. By establishing an account with BFC now, you can be ready for any financial crunch that should happen in the future. Call 702-947-3800 or go to https://bfc.vegas/.

Your Partner In Success,

David Cabral