If conditions change dramatically after you prepare the original budget, management may ask you to redo your budget entirely. This situation is not un- usual. In the recent downturn, many firms redid their budgets several times to reflect changing circumstances.
The revised budget should contain more valid assumptions based on existing conditions. In Budgeting, in offering advice on budget preparation, I warned against excessive optimistic or pessimism. This is important, if not more so, when revising a budget.
In tough economic times, where revenue is down, you may have to make tough calls about how to spend money. You may have to postpone filling a vacancy or curtail, or even discontinue, a project effort until more money is available. Some costs are better to cut than others. Reducing travel and luncheon expense (T&E), for instance, may make more sense than cutting staff training, because losing a development opportunity could demotivate your team.
If you can, involve your employees in discussions about the new budget. Working together, see if you can identify ways to get work done at less cost. Don’t cut costs yet keep targets high, unless there truly is a way to achieve those kinds of results. Shakespeare said, “Balance is all.” Balance what is achievable with funds that are available.