How to Operate in a Budget Deficit
- 1). Review the new projects you had planned to decide if they’re worthwhile to pursue at this time. When operating in a budget deficit you must make sacrifices, including holding off on spending money on risky new initiatives until your finances are back in balance. Risk management is important when operating in a budget deficit.
- 2). Itemize your operating expenses and take action to reduce variable costs going forward to lower your budget deficit. Variable operating expenses include utility bills, cost of goods sold, inventory management costs, commissions to salespeople and delivery costs.
- 3). Enact a performance-based pay scale (bonuses and commissions) for certain employees so that you can tie performance and productivity more closely to the salary expense. Performance-based pay helps ensure that your expenditures on salary are directly benefiting the company. The more productively and efficiently the business operates, the better the chance of a higher profit in the next budget reporting period.
- 4). Call your suppliers to ask for better rates on your raw materials, business supplies and products for resale. Ask for extensions on your invoices if necessary to help you get through the current budget shortfall.
- 5). Increase the intensity of your collections activities on unpaid accounts. Oftentimes, there is a cash shortfall causing a budget deficit due to a high percentage of accounts receivable outstanding. If necessary, sell very overdue accounts to collections agencies to perform the work and generate some cash to help cover the deficit.
- 6). Enact new, more aggressive sales goals for the next period. Focus on your business activities that have consistently brought you positive results. For example, if a certain sales promotion or advertisement in a specific publication always gives you strong sales results, focus on that strategy.
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