Doing a Budget Review Before H2? Make These High-Impact Changes
Some businesses review their H2 budget after the first quarter, others wait until the end of Q2. Either way, it’s crucial to review performance in the first half of the calendar year before adjusting the budget for the second.
And the time to get started is soon. H2 is almost here, and conducting a comprehensive budget review can be a time-intensive effort that affects a large swath of the team. Rather than rushing to finish and heading into the next six months with an imperfect budget, spend whatever time and resources it takes to make smart adjustments.
Those adjustments should be based on actual performance compared against the original budget estimates, while also factoring in things like real margins, staffing mix, and changing costs. The goal is to see where spending needs to increase to either meet obligations or seize strategic objectives, and where it needs to decrease based on budget pressures or cost-saving opportunities. Nothing should be taken for granted or treated like a foregone conclusion. Instead, everything should undergo verification, and every budget item should have a justification.
The real challenge of this process, even more than the time and energy involved, is deciding what to change and by how much. Being too conservative or too ambitious can both have their downsides. So how do budget builders find the middle ground? Focus on the areas of the budget where the initial numbers are most likely to have changed since the start of 2022:
- Operating Expenses – There’s a direct link between operating expenses and profitability. Cost cutting measures can turn into new profits, but they can also compromise operations in ways that anger customers and depress revenues. Alternatively, increasing operating expenses costs more in the short term can lead to larger profits long term. This underscores the need to carefully review and potentially revise every operating expense around mid-year.
- Staffing Mix – If demand has exceeded expectations, direct more money towards ramping up hiring efforts, or do the opposite if demand has been lower than expected. Cutting recruiting and labor costs creates a lot of space in the budget. However, being understaffed can jeopardize everything a business does. Finding the right staffing mix takes an honest assessment of who the company needs and who it can afford.
- Marketing Spend – It’s easy to waste marketing budgets on things that aren’t working or aren’t necessary. It’s also easy to reach either of those conclusions, slash marketing spending, and watch performance take a nosedive. Investing the right amount on marketing is notoriously difficult, in no small part because the right amount changes all the time. Use the time before H2 to take a close look at marketing spending compared to business performance since 2022 started.
There are some important decisions to make in a short amount of time. Rather than risking the wrong changes (or no changes), rely on Proseer to help you conduct an efficient and effective budget review that fine-tunes your spending strategy for the remainder of the year and beyond. Contact us to get it right.
