Top tips to manage your business budget despite COVID-19
Date : Aug 29, 2020
The idea of what is normal and what is not has dramatically changed in the wake of the COVID-19 pandemic. And most businesses are struggling to survive and face this sudden change in consumer demand and behavior, which resulted from pay cuts, job losses, worries about the future, and a change in priorities. So, it is natural that you will want to manage your business budget as judiciously as possible. Since your production and profitability might be heavily affected, now is the time to find out ways to cut costs in this crisis.
So, get started with these 6 tips:
Tweak your short and long term budgets – Over the last few months, your income was probably low or non-existent (if you closed down temporarily). So, assess your current cash flow and revise your budget accordingly. To recover from negative cash flow, you will need to do away with expenses that are not essential. Examine your fixed and variable costs separately too and decide how much you will have to invest to meet customer demands when things go back to normal. Both your short and long term budgets should account for different contingencies.
- Use forecasting tools – If you want to plan your business’s budget as accurately as possible, use the latest forecasting tools to figure out different scenarios (include both worst and best). It is a great way to assess your venture’s future sales, profit and loss, and cash flow. You can also hire a business management consultant who can do it for you and also offer wise counsel. He or she will also study your particular industry and competitors before making suggestions.
- Repay debts as soon as possible – When coronavirus struck, many small businesses had to avail loans to tide over a few (or more) months of uncertainty. If you too had to take one, try and pay back that debt at the earliest. A small debt can quickly snowball into a giant one if you ignore it now. So, make sure your budget accommodates that apart from the usual business-related expenses.
- Is your emergency fund enough – Like the pandemic, emergencies of several kinds can crop up when you are least expecting them. So, if you don’t have an emergency fund set aside already, do so now. And if you have a fund, make sure it is sufficient to help you if another crisis strikes. A cash reserve of 3 to 6 months worth of spending is ideal.
- Let go of what you can – Now is the time to make some tough choices. Try and reduce overhead expenses as much as possible. Let go of office equipment and supplies that you don’t really need and embrace technology to make this shift easier. Like, instead of land phones, use free calling apps and platforms. If you communicate via emails, lose the business cards. Try and go for a remote working model if you can, to save on rent and facilities. Hold off hiring for a while and tighten the compensation scheme if possible. Take a close look at your vendors and check if cheaper options are available.
- Try newer marketing methods – If it suits your business, try and ditch traditional marketing methods that are expensive yet reach a small audience. Experiment with digital marketing and discover ways to get free traffic to your website or online store. This way, you can reap greater benefits in the future.
To conclude, you can reduce business costs in a crisis and stay afloat if you try out the tips mentioned above. Controlled spending, forecasting future expenses and profits, and making some hard choices can help you manage your budget during these challenging times.