Budgeting in an uncertain time – Part 3
21st January 2020
Things every business needs to know
The work you completed in the planning ahead phase created your ‘forward budget’. Now we’re on the final furlong of creating your budget, it’s time to ensure you have a crystal-clear forward and backward plan laid out.
With all the facts and figures you’ve collated, take a look at your profit and loss and make an allowance for the tax you’ll need to take out, and the dividends you’re going to pay your directors.
Once done – do you like what you see?
Do your figures give you a picture that you’re growing your business reserves? Are you paying enough dividends to yourself as well as others?
Often (almost always!) your first budget outline won’t give you the figures that you want. Working backwards from the numbers you’d like to see (in your profit and dividends), you might want to make an adjustment to your other figures.
Do you need to make more sales?
- Do you need to lower your direct or indirect costs?
- Look at the major projects you have coming up - do you need to delay or accelerate these depending on the return on investment you’re expecting to make?
Share the Numbers
It’s always a great idea to get your team involved as early as possible, so now’s the time to bring their ideas into the mix.
Let’s be honest, cost-cutting decisions that are made from the top down are never received particularly well. Your team can feel like they’ve been kept in the dark and had changes sprung upon them, which can foster feelings of insecurity.
However, when you take a collaborative approach, this not only shows great leadership skills, but also that you respect your team. Collaborative target setting and cost-cutting often delivers surprises you weren’t expecting, because you’re empowering your team to share their ideas and feel involved in the direction your business is taking.
Yes, it can feel scary to admit the state of your business, but trust me, open and honest is a policy that always works best and brings out the best in those who are invested in working for you.
Once you’ve garnered ideas from your team, make any final adjustments required to the budget and then it’s full steam ahead! And be sure to share your finalised budget plans with your team. Remember, as we discussed in the benefits of budgeting, knowing the plan helps to focus your teams’ mind on the end target, and helps you all to know if the business is on or off track so you can course correct quickly if needed.
If you’re unsure about anything discussed and would like some support, get in touch and book a 1:1 benchmarking and budgeting session with our team.