Establish the Cutting Plan

• The first step in developing a strategy for cutting a budget is a clear definition of reasons why budget reduction is necessary. Management should have common understanding of reasons driving the cuts and agree on all steps for budget reductions. After the size of cuts is determined all upcoming changes must be communicated to personnel.
  
  

Strategy

• There are three main strategies to cut the budget: across-the-board cuts, targeted cuts and technology-driven cuts based on outsourcing. Across-the-board cuts, which cut equally across all departments, can endanger the main business of the organization if it harms major profit centers. Targeted cuts are relatively easy to manage because they relate to a particular business unit. Technology-driven cuts are based on technology advancements and require careful study of new opportunities and whether outsourcing brings new benefits to the organization.
  
  

Cash Balance

• The main danger of budget cutting is a lack of cash for financing the company's operations. Therefore, as a part of any reduction plan, managers need to ensure that the company has enough cash to cover operational expenses and pay immediate expenses. The strength of cash balances is an important element of the successful budget cutting.
  
  

Communicate

• Translate your budgeting initiatives to company's personnel. Explaining reasons for cuts and how they relate to sustainable development of the company is necessary to gain support at all levels.