The uncertainty created by COVID-19, the 2020 presidential election, civil unrest, and other economic stresses have created volatility in company operations and performance. As a result, companies are facing a significant challenge in business planning and forecasting and need to adjust their approach accordingly.

The upcoming annual budgeting cycle must be more than a financial exercise—it should be a collaborative effort among finance, sales, operations, and other functions. The budget is one element of the overall business plan used to make decisions on allocation of capital, to align the activities of the business, and to drive ownership/accountability of the operating plan.

Decisions related to potential investments, the proper level of inventory to hold, and employee bonuses and incentive compensation, can all have significant implications in an uncertain environment. If you’re too conservative – you may be undersized and miss an opportunity to take market share or will trail your competition once a full recovery is underway. If you’re too aggressive – you may build up too much inventory or make capital investments which drain your cash and jeopardize your financial stability.

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