As we are already two weeks into the fourth quarter, companies should be well on the way to developing projections and budgets for 2021. Most years, business leaders are able to review results, identify trends, and take into account initiatives that are underway or anticipated for the following year. And in normal times, a careful, thoughtful financial plan helps executives predict, control and measure an organization’s activities.
In 2020, for most businesses, these prognostications simply went out the window. And in the face of the continuing pandemic, political upheaval, social unrest, and financial shock, 2021 is likely to be similarly unpredictable.
What does this mean for the forecasting and budgeting process?
- First, change expectations. In a world of unpredictable events and accelerated change, budgets cannot be relied upon as a control mechanism. Being wedded to a flawed forecast when navigating rough waters will only exacerbate the danger ahead.
- Second, focus on desired outcomes, not merely sticking to the plan. The emphasis should be on strategic accomplishments more than meeting precise financial markers.
- Third, be agile, constantly learning and adapting to changing circumstances. Anticipate the need to modify the financial plan during the course of the year. Setting targets is important, but incorporating lessons learned will increase the likelihood of success.
So, for 2021, don’t let your budget be a crutch – or worse yet, a fantasy. It can be a useful starting point, but be realistic about the probability of a changing environment and be prepared to adapt. And most importantly, stay focused on achieving your larger strategic objectives.
For other insights or help with your budgeting and planning process, give a us a call.
Marc Alterman is the principal of MA33 Strategies, LLC, a consultancy dedicated to providing strategic planning and general business advice to entrepreneurs and executives. For help with your company’s overall strategic direction or other management challenges, contact Marc Alterman at marc.alterman@MA33Strategies.com.