First, find out why it happened. A line-by-line review of your profit-and-loss statement will assist in this process. Did you overproject sales? Were expenses too high? These are two of the main reasons companies don’t hit budgets. From there, identify what caused the shortcomings. If you had a lack of sales, was it because of poor customer service or an ineffective marketing strategy?
If your expenses were too high, was it because of overstaffing, out-of-control supply costs or high employee turnover? Of course, you may have fallen short simply because the budget you proposed was too aggressive or unrealistic.
After you determine exactly why you missed your budget, implement measures to ensure that it doesn’t happen again. For instance:
- Retrain staff to ensure a high level of customer service.
- Review your marketing strategy.
- Establish accountability for your supply budget.
- Improve employee morale.
- Review employee schedules.
- Ensure that your budget is realistic.
It helps to involve staff members in coming up with ways to meet your budget and help you move toward achieving significant positive cash flow. They typically can offer key insights into your business to help you determine where you might be falling short. And your team can also play a major role in cutting costs, providing feedback on your marketing strategy and improving customer service. Remember, they’re the ones who are in the trenches every day; therefore they have firsthand knowledge of which business practices are effective and which aren’t.
Staying within a budget is a team effort, and by getting all your team members onboard, you’ll have a much better chance at success.
Andrew Schrage is co-owner of Money Crashers Personal Finance.