How to Adjust Your Business Budget When Life Happens

Your business budget puts you in control of your company. It helps you avoid overspending and track financial goals. But with the coronavirus in full swing, you may have had to throw your business budget out the window to stay afloat. To get your business budget back on track post-coronavirus, you might need to make some modifications.

Business owners across the country halted operations and saw a decrease in cash flow thanks to the coronavirus. As states lift stay-at-home orders and day-to-day operations return to normal, businesses will need to adapt their budget to account for the new normal.

Pay Attention to New Numbers

Chances are, your business has been impacted by the coronavirus in some shape or form. Maybe you had no choice but to temporarily close your business due to new regulations. Or, maybe you made the best out of a bad situation and came up with a creative way to maintain your cash flow. Either way now is the best time to rework your business budget and do some much-needed tweaking.  

If you have experienced a decrease in revenue over the course of the coronavirus pandemic, you’ll need to account for that in your budget. And to help bounce back from the negative cash flow, you may need to make some sacrifices, such as cutting unnecessary expenses and reducing spending. 

If your cash flow wasn’t negatively impacted by the ripple effects of COVID-19, you should still consider taking a look at your numbers to ensure your spending won’t exceed your income. Track your finances in your accounting software to see where you stand.

Utilize Financial Forecasting

If you’ve never heard of financial forecasting, here’s a brief rundown. Financial forecasting can help you estimate your business’s future financial health by looking at past financial data and reports. Forecasts can help you estimate future income, expenses, profit, and cash flow.

Forecasts can be made on a weekly, monthly, quarterly, or yearly basis, and aid in assessing the success of any COVID-related business decisions or changes to your business model.

Reevaluate Your Emergency Fund

Does your business have an emergency fund or cash reserve? If you have one, great! There’s no better time to reevaluate your funds to ensure you’re all set if disaster strikes again. On the other hand, if you don’t have a fund in place, it’s time to giddy up and set some of your budget aside for the unexpected. The general rule of thumb is having a cash reserve that covers three to six months of expenses … so get saving!

Prioritize Paying Back Debts

A number of coronavirus loan options were established to help out struggling small businesses during the coronavirus. While some loans are forgivable, others are only partially forgivable, and some are not forgivable at all.

If you had to take out some type of loan or borrow money during the crisis, you’re not alone. And unless you got a fully forgivable loan (and are using the loan for eligible expenses), you may have racked up some debt. 

To avoid being stuck in debt for many years to come, prioritize paying off your debt as soon as possible. Make room in your budget for extra loan and debt payments (after covering necessary expenses and your emergency fund).

Look at Your Financial Goals

If you’re like many others, the coronavirus has forced you to rethink your strategic and financial goals. Your strategic plan is not a static document; once it’s created, it must be reviewed and adjusted again and again over time.

Need a trusted advisor to review your financial plan? KG Virtual CFO offers part-time virtual CFO services for businesses in need of advanced financial support and direction.