The pandemic makes it more important than ever for small businesses to review their budgets on a quarterly basis and update them to keep pace with rapid changes.
Small Business Budgeting During and After COVID-19
Whatever your small business thought was going to happen in 2021 almost certainly did not happen because of the COVID-19 pandemic. Some businesses boomed, others went bust, and most had to pivot again and again to keep pace as the world changed in unprecedented ways.
It’s important to use the lessons learned from 2021 to inform how you create, review, and update your business budget for 2022. If we’ve learned anything at all, it’s to prepare for the unexpected.
Why business budgets matter
Business budgets provide a helpful overview of finances, including both the current state of your finances and your long-term financial goals. They’re a critical tool for making sound financial decisions and for getting support and funding from investors.
The pandemic disrupted everyone’s budgets, but that doesn’t mean they’re not needed. In fact, the lesson is the opposite: It’s more important than ever that you have a detailed budget in place to understand exactly where your finances stand right now and what you need to do to hit your goals.
What did you learn in 2021?
It’s not too late to get started on creating your 2022 budget. One of the first steps is to learn from the past by carefully reviewing your 2021 gains and losses.
How much did you spend and how much did you make compared to how much you forecasted in your budget? Where did your expenditures and revenue come from compared to where you thought they would? The lessons learned in 2021 can help you craft a budget for 2022 that is realistic and achievable.
Review your budget more often
One common mistake for small businesses is to review their budgets only once or twice a year. That’s never really been enough, and it’s even more important now to review and update your budget every quarter. That’s because the pandemic isn’t over, and its effects—from worker shortages to supply chain delays—are likely to continue affecting businesses throughout 2022.
By reviewing and updating your budget every quarter, you can make informed financial decisions throughout the year. That might include cutting spending if you’re not meeting your revenue goals, or focusing more of your time and energy on areas of the business where revenue is growing versus areas where it’s declining.
No matter what happens next, and how much life and work change, you’ll be more prepared with an updated budget in place.
Get help with budgets and more
BST offers a broad portfolio of accounting and auditing, tax, consulting, and wealth management services, as well as the valuation, forensic accounting, and litigation support. Our Virtual Accounting Solutions (VAS) offers outsourced accounting and best-in-class technology solutions to help businesses improve budgets and forecasts.