Finance: How Do You Know When You Should Change Your Budget?
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partner of consulting firm The Player Group: You should change it whenever the key assumptions it is based on are no longer valid.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.
About the Author
Dave Blanchard
Senior Director of Content
Focus: Supply Chain
Call: (941) 208-4370
Follow on Twitter @SupplyChainDave
During his career Dave Blanchard has led the editorial management of many of Endeavor Business Media's best-known brands, including IndustryWeek, EHS Today, Material Handling & Logistics, Logistics Today, Supply Chain Technology News, and Business Finance. He also serves as senior content director of the annual Safety Leadership Conference. With over 30 years of B2B media experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2010), which has been translated into several languages and is currently in its second edition. He is a frequent speaker and moderator at major trade shows and conferences, and has won numerous awards for writing and editing. He is a voting member of the jury of the Logistics Hall of Fame, and is a graduate of Northern Illinois University.