10 Budget Planning Tips for the New Year

A new year heralds breaking out the bubbly and the party favours. However, there’s still a lot of work to do: namely, assessing the year that’s about to end and figuring out how your company can improve in the new year. To ensure you’ve got all those fiscal bases covered, here are a few ideas to consider that will help you prepare for a balanced budget in the months to come.

1. Identify recent trends

Check out what patterns emerged during the current year and look for any leeway in your budget to allow your company to take advantage of related opportunities. Is there a hot product out there that might have a longer shelf life or is there a geographic region that might want what you have in stock? Now’s the time to investigate those possibilities.

2. Be conservative

All companies realize the need to be cautious when pursuing new ventures. Even if a prospect looks very promising, avoid the tendency to put all your eggs in one basket. Take the time now to plan for any worst-case scenarios and come up with a realistic number for what you need to invest to garner more sales. Safeguard against disaster by setting aside emergency funds and make sure you’re not banking on risky wins.

3. Consider automation and upgrades

Though investing in software and upgrades might take a chunk out of your investment budget, if implemented properly, it won’t be long before the ROI is realized. This point is especially applicable to procurement, which can eat up valuable time if done inefficiently. Automating software like Procurify has been designed to save time, reduce mistakes and increase production so that your team members can focus on the more nuanced aspects of their jobs.

4. Review expenses

Did you notice that you consistently ordered items last year that didn’t get used? Now’s the time to stop doing so and to free up that funding towards supplies and inventory that will actually benefit the company. A review of your consolidated purchase order statements can give you all the answers that you need.

5. Check out competitive suppliers

Procurement involves a lot of relationship-building, but if you’ve begun ignoring other suppliers, now’s the time to see which ones can offer better deals. If you do find a better option out there, consider how switching suppliers might improve your bottom line. Furthermore, make your concerns known to your procurement agents to ensure that they’ll focus on budget-friendly policies in the future.

6. Give yourself some wiggle room

Sure, a tight budget might look impressive if you’re going through some tough times, but you need to be able to respond to any changes in the industry. Or if opportunities suddenly appear, you need to have the resources to take advantage of them. Every budget allows for some slack, so consider assigning a percentage of additional funds for each item on your sheet. That percentage will allow you to shift money into critical areas without disrupting your operations.

7. Leave no stone unturned

Some departments would argue that small expenditures won’t impact company performance dramatically, but if frivolous spending behavior continues over time, your company might find itself in the red. Stay in the black by cutting out even the most minute unnecessary costs and focus on purchases that have more beneficial results on your company’s ability to compete in the marketplace.

8. Examine profitability of products and services

One handy trick when creating a budget forecast is to look at how many resources go into the purchase or manufacturing of a product or service you’re selling. For example, if you’re selling a widget that costs $10 but requires $7 in labor, $2 in materials and $1 in overhead, here’s a chance to review those costs and come up with ways to shave off any extra expenses.

9. Consider cyclical activity

Experienced people in business will tell you that some periods in the year are hotter than others. The fourth quarter, because of the holiday rush, is usually the busiest for economic activity, while summer months are relatively calmer because that’s when most workers take their vacations. Consider these fluctuations in revenue and break down which expenditures are more appropriate during various times of the year.

10. Examine company goals

Re-examining the objectives of your company is a good way to prioritize which areas need more attention. If your company is looking to increase sales, you’ll want to increase expenditures that allow revenue generators to do their jobs more efficiently. If the organization is looking for a higher profit, be prepared to cut back on your expenses.

A thorough budget that’s flexible enough to withstand even the toughest financial scenarios will give you the artillery you need to take on future challenges. It will also give you peace of mind that even the most menial concerns are taken care of. Take the time now to consider how you can budget for a better year so that you can enjoy a fresh start in 2016.

Photos: Tashatuvango / Shutterstock, Wilfred Iven, Luis Llerena, Luis Llerena, tookapic

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