Tim Proome, general manager of supply chain services, Tarsus Distribution.
How do we find new ways of doing things in uncertain times? The COVID-19 pandemic has revealed that many businesses were simply ill-equipped to handle a sudden global economic meltdown. As we prepare to head into a new year,uncertainty, fear and insecurity are common sentiments, making the annual budgeting and planning process especially challenging.
Budgeting identifies available capital, provides an estimate of expenditure and anticipates inbound revenue. It’s crucial to budget well in these uncertain economic times.
Here are 5 tips on how to get it right:
1. Identify your financial goals
What do you want for your business in the coming months? Do you want to increase cash flow? Do you have a tangible goal such as saving enough money to buy a particular piece of equipment? Do you want to collect more customer data? Are you aiming to reduce debt? Knowing exactly what you are budgeting for is an essential first step to moving forward.
2. Use the right data
The inability to access the right data, tools and resources are all barriers to better budgeting decisions. Use accurate, historical data to inform your budget, such as your business’s latest sales analytics, up-to-date books, and accurate financial statements.
3. Design different forecasts
Uncertainty makes it difficult to plan, so take different possibilities into account. Create forecasts that look at meeting your revenue goals, exceeding your goals and falling short of your goals. These discrete scenarios will enable you to make informed projections and budget accordingly, to determine what success and failure will look like, and to be better prepared for every outcome.
Developing short-and long-term business objectives will empower you to create a road map for financial success and to identify opportunities even in the most difficult of times. Because uncertainty is everywhere, it’s vital to review and update your budget regularly to maintain a sense of reality. An up-to-date budget will help you manage your cash flow effectively and identify what needs to be achieved in the next budgeting period.