Budgeting Tips for Small Businesses in Tough Economic Times

Small business managers probably like budgeting the least of any of their managerial tasks. That’s because it is far from an exact science, particularly during changing economic conditions. Small businesses may see their actual budgets vary significantly from their planned budgets during difficult economic times. When there is an economic downturn, small businesses need to re-evaluate their budgets and make some changes. These tips will help.

1. Emphasize Customer Service

During hard economic times, you may not gain many new customers, but hang on to those you have and provide superior customer service. At least you will be able to rely on continuing sales, even if at a reduced level, to your current customers. Excellent customer service will also insure they will stay with you when the economy improves.

2. Review your Forecasted Budget

Even though things are uncertain during hard economic times, you should review your forecasted budget for the rest of your year, whether it is the calendar or fiscal year. Have a meeting with the rest of your team including your accountant, sales force, and others as they can probably add valuable input to the budgeting process. Depending on your business, you may know that your sales may fall and your expenses may increase. Update your budget to reflect these changing line items to the best of your knowledge.

3. Talk With your Suppliers

Before any problems arise, talk with your company’s suppliers. Reaffirm your relationship with them and ask about renegotiating your credit terms if your business should fall on hard times. If you have been a good customer, chances are that the vendor will work with you. It is better to have this type of plan set up in advance in case the worst happens.

4. Keep an Eye on your Credit Accounts

Watch your accounts receivable to be sure your credit customers are not falling behind with their payments. If your credit customers fall behind, then you will fall behind. However, if your best customers need some help for a period of time, you might consider easing your credit terms temporarily to maintain your customer base.

5. Reduce your Administrative Expenses

Cut your administrative and office expenses to the bone. Reduce company travel as much as possible. Cut office supplies, expense accounts, lunches out, and long distance telephone costs. Look for every way you can cut corners without seriously compromising your business. Ask for your employees’ help. You will find they are glad to pitch in.

6. Schedule Regular Budget Meetings

Schedule monthly budget meetings with your employees to determine how you are doing in maintaining or increasing sales and reducing expenses.