The COVID-19 process reminded businesses once again the importance of an issue: BUDGETING! Especially in the normalization process, 5 tips that businesses should follow in the field of budgeting can be life-saving for many businesses.
Operating budgets help companies to avoid overspending and track financial goals in a controlled manner. There are many remarkable points such as how ready your business is against crises, how successful it is to adapt to current conditions, or what the balance of income and expenditure should be.
Especially in the normalization process, 5 tips that businesses should follow in the field of budgeting can be life-saving for many companies.
1-) Know where you stand financially
There is no single company that is not affected by the pandemic process that emerged with the coronavirus.
During this period, some had to temporarily close their businesses due to current conditions, while others had to find different ways to protect their cash flow.
Whatever the result, it is certain that there has been a significant change in the balance of income in many companies over the past few months. That’s why work has been and is being done in businesses these days to re-organize the operating budget and make the necessary fine-tuning.
It is obvious that companies that experience a decrease in income during the pandemic period must make some sacrifices in order to reduce unnecessary expenses or reduce spending.
Companies that do not experience a decrease in income need to control their spending and make sure that the expenses are progressing at a level that does not exceed their income.
2-) Take advantage of financial predictions
Wouldn’t it be great if we predicted the future of our business? Of course it would be. What we can do as business owners is predict when it comes to our budgets and cash flows.
Financial forecasts are extremely important in predicting the future financial condition of the company by looking at past financial data and reports. These predictions, the income and expenses of the enterprises; profit and loss statements; It can also help them prepare road maps on issues such as balance sheets and cash flow.
In addition, these types of forecasts can bring along the advantage of updating the budget plan in the current period and preparing in the best way for possible emergencies that may occur in the long term.
3-) Re-evaluate your emergency fund
Although emergency funds may seem suitable to be spent in non-emergency situations, it is worth thinking a few times before taking such a step. The truth is, you never know when your business will encounter an emergency. As a matter of fact, no business could have predicted the pandemic crisis experienced in this period.
Although there does not appear to be a problem for companies with emergency funds, businesses that do not have such an accumulation must allocate at least a certain amount from their budget. Thus, the business can survive even in the worst scenario. The general rule of thumb is to have a cash reserve covering six months’ expenses. So save!
4-) Give priority to repaying debts
During the pandemic process with the coronavirus, many small or medium-sized businesses took advantage of various loan options or went to borrowing. Businesses that do not want to be under a heavy credit burden for years to come should list their priorities to pay their debts as soon as possible.
It is necessary to make room in the budget or revised budget to cover loan and debt payments. Of course, provided that you do not set aside the operating expenses and the emergency fund! That’s why it’s worth setting a final goal and focusing on paying off the debt all at once.
5-) Re-evaluate your financial goals
During the pandemic period, most of the businesses reassessed their budget and financial targets. It is obvious that the most rational way is to match the current financial targets with the budget. If a serious change in the budget is planned due to the corona, future financial targets should be adjusted to reflect this.
It is a known fact that the budget should always reflect the priorities and financial goals of the business. A mistake made in this way can lead businesses surviving the corona process to a stalemate in the long run.