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Beware the three evils of an inflexible budget

by , 30 October 2014
If you're anxious when it comes to your company's finances, you've probably created a budget to help you control your spending. But because of your anxiety, you might become too precious about it.

This could land you in deep financial difficulties. If you're not flexible with your budget, you might cause a string of financial events that leave you without cash or an idea of why.

Don't believe me?

Then let me reveal the evils of an inflexible budget that could zap your company's cash flow...

 

These inflexible budget evils could cost your company everything

 
1. You might not want to change your budget and you think that's okay. But that doesn't means your company's financial situation won't change. If your financial situation changes but you don't change your budget, they won't match up. This means your budget might have important expenses missing or too many unnecessary expenses. 
 
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2. Because of the change in circumstances, but not in the budget, you might end up forcing your company to run under unrealistic expectations. 
 
For example, let's assume your company lost a lot of money but you don't change your budget. Your budget says you must spend R15 000 on new office chairs. Your managers tell you the company can't afford it, but you don't listen. You managers buy the chairs as you instructed and your company makes a financial loss.
 
3. This, in turn, will affect company morale. If your employees see you're making a loss, they'll think the company is doing badly. This might make them feel anxious about their jobs. This could lead to lower productivity and even widespread resignations. This has another negative effect on your company's bottom line.
 
The moral of the story: An inflexible budget will affect much more than just your finances and not in a good way. Be flexible with your budget so it always reflects your current financial situation.
 
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