When Would a Budget Need Reconstructing?
A crucial factor in the success of any business is the company's budget. If the company doesn't accurately track and plan for expenses and income, it's hard to determine what the business can and cannot afford or achieve. Budgeting isn't a static task, and in certain cases, businesses have to restructure their budgets to survive in the marketplace.
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Restructuring Situations
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Companies have to restructure their business in four primary situations. The first situation is when the economy shifts. Economic shifts influence what consumers purchase and therefore often result in budget cuts or different ways of distributing funds. The economic climate also influences what materials --- including human resources --- the company can afford. The second situation is when the goals of the organization change. For instance, if the goal is to promote a new product, then a business may restructure the immediate budget to allot for more advertising. Restructuring a budget also is necessary when consumer demand --- that is, trends --- changes. For example, a company may invest more in technological products as people become more familiar with social networking tools such as Facebook and Twitter. Lastly, a budget must be restructured if it's not meeting the company's needs. The only way to determine this is to look at receipts. If a portion of the budget consistently has a deficit, this is a signal more funds need to be directed toward that area.
Accountant Considerations
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Restructuring a budget requires accountants to collect and analyze all the financial data for your company. Restructuring when accountants are busiest --- for example, during tax season and open enrollment periods --- may not be a good idea because it spreads these workers too thin. The best time to work on the budget, therefore, is in off-seasons, although company emergencies may not give you a choice and you must have enough current data to make budget predictions.
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Agreement
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Restructuring a budget sometimes has positive results on all departments, but this usually is the exception rather than the rule. Usually at least one department suffers and has to make do with less. Because of this, whenever you restructure a budget, you should expect a bit of negative feedback. It may be easier to restructure when morale is high and your company has implemented positive changes. Unfortunately, companies often restructure when they're in danger and tensions are high.
Consultants
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If a company is in doubt of when to work on its budget, it's acceptable to hire an outside consultant to review its accounts. The consultant looks at the industry, circumstances and history, as well as the company's finances, to determine whether restructuring is worth the energy. If the consultant deems restructuring is a viable option, he can offer the company options on how to rework the current budget given economic conditions, trends, company goals and how the budget has functioned previously.
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References
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