Budgeting For The New Year In A Recession

12/01/10

By Compleat Software

Imposing budgetary cuts may appear to be the best way of mitigating risk in a recession. But how many financial directors actually have the controls in place to ensure budgets are not overspent? And how many have actually achieved a consolidation of suppliers and negotiated the very attractive discounts now on offer?

In reality, an organisation's adherence to budget is determined not by the FD or even senior managers but by the junior individuals who make purchases on a day to day basis. Why risk possible business success by announcing swingeing capex and head count cuts across the board,...

...while failing to police day-to-day expenditure?

It is those organisations that impose real control over budgetary spend across the business that will be best placed to reduce costs, negotiate discounts, deliver bottom line benefit and actually invest for a 'post recession' future, argues Neil Robertson, CEO, Compleat Software.

Balancing the approach
Business leaders across the country were surprised and disappointed to learn that the UK continues to languish in recession - especially given signs of recovery in other global economies. Based on the graph below and considering the 4% drop during the last quarter (June to September), only a brave individual would believe that growth is just around the corner.

The market is still receding, which will increase not only the pressures on trade in the short term, but potentially the long term as well. The financial tide is yet to turn, there is no consensus on how long the UK economy will remain at this low point, nor any idea how long it will take to achieve the level of business enjoyed just 18 months ago.

The challenge for every finance director undertaking the next financial year's budgeting process is judging the balancing act between a conservative approach to mitigate risk... continued on page two >

 

 

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