Setting Your Annual Budget Amid Economic Uncertainty

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When times are tough, cash is king. That’s doubly true as interest rates rise.

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Redesign your planning and your monthly and quarterly reviews so anyone running a business unit sees all three views of your business: the P&L, the balance sheet, and cash flow. Understand where your revenues are most vulnerable and what a sudden drop in demand would do. What costs are at risk? What assets will be impacted? What signs will warn you?When times are tough , cash is king. That’s doubly true as interest rates rise.

Build out three scenarios and three responses — levers you can pull at a moment’s notice. First is the easy-to-pull lever: actions that conserve cash with no long-term damage, such as hiring and travel freezes, reductions in discretionary spending, cuts in some kinds of marketing spend. Finally, prepare a crisis playbook: the actions to take if the business suddenly finds itself in deep trouble, such as layoffs, reorganization, or selling assets or a business.

 

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