Many companies are starting the new year under a cloud of uncertainty and a haze of fear. Due to the COVID-19 pandemic and a stressed global economy, planning for how this year will unfold has proven to be more complicated than in years past. With the vaccines being distributed, we seem to be climbing out, but no one knows when the world will finally control the virus or what the economy will look like when it happens.
With that in mind, every business needs a budget and a plan to operate, but surprisingly many skip one or both. By budgeting and planning, you give your organization an organized roadmap for survival to help determine whether your marketing, employee compensation, asset acquisition, and other integral parts of your business can run optimally.
Don’t risk the financial health of your organization when budgeting and planning holds the key to your success. Skipping these crucial processes creates unnecessary challenges that a little preparation and accounting software easily prepares you for.
Because this year has already kicked off like no other year before it, use these tips for better planning and budgeting in 2021:
Prepare for anything
Ask yourself, “How adaptable are we?” Adaptability means capitalizing on change with the ability to recover when a sudden event changes everything. When the pandemic hit, the business community had to adapt or perish. Adaptable businesses that quickly pivoted to online meetings, staggered scheduling, and alternate service deliveries came ahead of those who couldn’t. Stay on top of your marketing, customer engagement, company culture and service/product delivery to attack curveballs creatively.
Protect your assets
Protect your creative, intellectual, and personal property and ensure the foundation of your business is secure. It’s better to plan your asset protection strategy before finding yourself in a circumstance to need it, like litigation. First, be sure you’re operating under the correct business entity designation. Are you a sole proprietor, LLC, corporation? Once you have the right entity, be sure to obtain a commercial insurance policy to protect you, and don’t forget to separate your personal and business assets.
Avoid “the way it’s always been done” mindset
If 2020 didn’t give you enough reason to shake up your budgeting and planning processes, maybe 2021 can. Collecting, consolidating, and organizing data for budgets and plans is an unpleasant process, but now is the opportune time to rally your leadership and focus on your future. Where can you automate? What can you streamline? How does your accounting solution play a role? What opportunities has the pandemic created for a new product or service?
Concentrate on business drivers
It is essential to distinguish your crucial top-line and profit drivers from both a financial and operational perspective. Typical business drivers include fixed costs, variable costs, prepaid expenses, sales volume, pricing, and quality. Consider what fixed expenses you can negotiate down, such as the annual office lease, and which variable costs you can better plan around, including the time hourly employees work per week. With a proper budget using real-time data, you can even create projections that allow you to transform fixed costs into more favorable variable ones.
Adopt rolling forecasts
A rolling forecast is a financial model that predicts your future performance over a continuous period using historical data. Static budgets can limit growth and without the flexibility to account for sudden events. With rolling forecasts, you get improved accuracy and risk analysis with the ability to be opportunistic in changing times. In the financial planning and analysis realm, rolling forecasts enable you to have greater planning and budgeting adaptability to better allocate resources in evolving market conditions.
Stay fresh on customers’ minds, especially the loyal ones
Crucial for every business, your marketing indicates how well you understand your customers and their pain points to educate them, deliver value, and attract new prospects while keeping existing customers engaged. Social media platforms are generally free to use unless you dive into paid targeted advertising. Even then, your marketing should absolutely include a social strategy whether you opt for paid advertising or not. Research shows that nearly 50% of the world uses social media to the tune of over 3 billion users worldwide. Don’t forget to nurture your happy, loyal customers since these are most likely to spread the word of their satisfaction and post about your business on social media. Consider offering referral incentives, loyalty programs, or asking for online reviews. Consider monitoring and commenting on reviews because it shows you are actively engaged in your customer satisfaction.
Employing the right tools for the job
Budgeting and planning challenges most often originate from using the wrong tools. When planning for your future, you want a solution to rely on historical and real-time data for informed decision making. Budgeting doesn’t have to be problematic when you have an integrated ERP system for a single source of truth.
To grow your business and achieve your goals, you need financial budgeting and planning that’s effective, collaborative, and strategic. Unfortunately, most organizations don’t have the solution to help them make it happen. Instead, they’re trapped by time-consuming, error-prone spreadsheets because the alternatives appear to be just too complicated.
If you are looking to upgrade your ERP solution, maybe it’s time to look at Sage, the easy-to-use yet powerful cloud solution for businesses. Deploy it in just a few days and say goodbye to the spreadsheet headaches. As the only cloud financial application and AICPA preferred financial management software for both CPA firms and corporations, Sage makes sense when you’re considering an upgrade to a cloud ERP solution.
Are you ready for 2021 and beyond? Contact one of our business growth advisors and we’ll make sure you have all the information you need to budget and plan for your future success.