When it comes to budgeting, there's a basic rule of thumb, says Steve Player, founder and managing partner of consulting firm The Player Group: You should change it whenever the key assumptions it is based on are no longer valid. Player offers the following reasons companies should rethink their current budget -- or, indeed, rethink whether they need to put less time into the budget process and more into the planning process.
1. Economic growth is coming in much stronger or much weaker than expected.
2. The overall environment you operate in has a major change -- such as the nuclear power crisis after the earthquake in Japan.
3. Key commodity prices such as oil, steel, etc., are higher or lower than expected.
4. Key currencies are stronger or weaker than expected.
5. Competitors are reacting differently than you expected.
6. Or worse, competitors have taken the initiative by acting first, forcing you to respond.
7. Customers are reacting differently than you expected.
8. Key suppliers are changing the way they serve the market -- e.g., they vertically integrate and, in doing so, begin to compete with you.
9. You have become aware of new technology or new ideas that can dramatically improve your business.
10. Key human capital talent -- such as an outstanding sales resource -- has become available.