We have all done it. Reveling in that nice feeling of accomplishment after creating a great budget from a detailed analysis… only to have it blown within the first month of the new year. Can we avoid these unexpected curve balls? It is not likely that we can avoid them all together, but there are activities that will minimize the impact on company operations.
First, let’s take a look at some common areas that may affect budget projections:
• Increased vendor costs
• Sales fluctuations due to changing economic conditions
• Employee turnover
• Unanticipated replacement of major machinery or equipment
Build a contingency plan to minimize impacts felt by the company.
• Determine historical cost increases for your industry, and budget closer to the high end. Review widely circulated economic projections to assist with your assessment.
• Be prepared to reduce costs in time of decreased sales and ramp up production when goods are flying out the door. Have a plan before this happens.
• Don’t underestimate the impact of good employees on production or operating efficiencies. Make sure you are meeting with your employees at least annually to identify areas that need to be addressed. Do you have a program to cross train for key positions?
• When was the last time you had that AC unit or production equipment serviced? The last thing you want is to miss a delivery date due to equipment problems. That annual service contract may look like an unnecessary expense but it may pay dividends in the long run.
Planning for contingencies are often taken for granted. Leaning on experts to review your budget projections and cash flow will help identify the potential areas of risk. Not every risk must be covered, but just enough so that you can sleep at night and there are no unexpected surprises around the corner!Business Owner, Ceo, future, planning, Projections, vision