The main event most of us will remember from 2020 is the COVID-19 pandemic — it has affected just about every industry in one way or another. The global economy has been thrown into rather uncertain times, which has negatively affected most businesses but especially small businesses.
The pandemic hit the world around the beginning of the year when business owners and companies were still working on creating functional budgets. This led to a lot of micromanaging on the part of owners and company leaders and the use of contingency plans to “plug the hole until it could be fixed.”
Even when budgets were created, they ended up being almost unusable due to economic changes, thereby creating numerous uncertainties.
The business year will soon end and 2021 will be upon us. It’s time to address your budget again so that your business remains on track to achieving your financial goals.
Here are a few tips business owners should implement to keep working toward their financial goals irrespective of the uncertainties that lay ahead:
1. Stay informed
With uncertainty often comes panic and the potential for errors. Also, the phrase “subject to change” is being thrown around a lot when describing what the next 12 months have in store.
While that statement is true to an extent, it’s best to find out the facts as they relate to your business in particular. This will help you prepare a somewhat accurate budget that you don’t have to deviate from far too much.
2. Take a look at your current numbers
One sure effect of the pandemic was that it impacted everyone differently. Some businesses thrived, especially those that could adopt a remote form of work, whereas others were hit hard. Either way, your income likely changed due to adjustments your business had to make to keep operations running in light of stay-at-home advisories and other changes brought forth by the pandemic. Create a new budget according to these changes or just tweak the old one at the appropriate points.
3. Make operational changes to reflect your new budget
Remember that 2021’s budget will hinge on this year’s fiscal end. Do some of what you know and are used to but be open to flexibility and making appropriate changes as needed.
If you have to operate at reduced capacity, then go ahead. If you have to cut down on resources or switch up your processes, try to do so in a manner that minimally affects the overall productivity and results of your business.
4. Work on your priorities
Perhaps start by creating a scale of preference, where you place your most pressing needs on top with the less important needs much lower on your list.
Several businesses had to take out loans just to stay afloat during the pandemic. If this was your case, then paying back those loans should be your priority or number one on your list. Failure to do so will ensure that you fall off track of your financial goals over time.
On the other hand, if you didn’t have to take out a loan, try to keep it that way. Limit expenses as much as possible and get more creative with your business. Stay on top of your finances, maximize profit, and cut costs where possible.
5. Develop a more creative and flexible attitude toward your finances
If you’re wondering what we mean by “creative and flexible,” then let us remind you of our initial assessment that businesses were all affected by the pandemic differently — that is, those who thrived and those who experienced some hardship, financial or otherwise.
Think of creative ways to make your business work more efficiently, or to generate more income. If you’re able to drive sales, then use your profit well, and also build cash reserves to fund future expenses or emergencies — this is crucial.
It’s also important to create a flexible, agile budget. You must monitor your budget and adjust as the future unfolds and things become less “subject to change.” Don’t be too rigid on this front.
Ultimately, the uncertainties that came with the pandemic also brought some important teachable moments. That said, gather what you’ve learned so far and make solid plans for your business’s financial future. Determine your income sources, your fixed and variable expenses, and create the best budget you can for your business under the circumstances of this “new normal.”
With these five tips and thorough, proactive planning, you’ll be in a better position to pull your finances together and reach your goals before the next business year. If you need help re-evaluating your business budget and goals before year-end, contact the Shone Wealth Management team.