Project Overview:
In the previous project part, you developed a flexible (flex) budget based on an unforeseen expense provided to you by your professor. For this project part, you will take things one step further by determining ways to reduce spending in different areas or aspects of your business.
Using your operational budget as a guide, determine three potential cuts to spending in your business. These cuts may be broad (e.g., an overall staff reduction of X%) or targeted (e.g., switching from expensive oak to much cheaper pine for the production of skateboards).
The goal is not to create an immaculate budget, but to find creative opportunities for reducing your overall spending without affecting the quality of your product or the health of your company.
Bear in mind that business solutions, especially with regard to budgeting, are rarely straightforward. Not every cut your team makes will be a matter of simple subtraction. Sometimes investing more money in the short term can lead to spending less in the long-term. Other times, outsourcing or sub-contracting work can reduce costs across multiple departments or processes.
Regardless of the cuts you propose, be prepared to explain your group’s decisions either in class or in the Budget Analysis Discussion Board.
Procedure:
- Using your operational budget as a guide, conduct a budget analysis and determine three potential areas or aspects of your business that could receive cuts to reduce spending. These cuts may be broad (e.g., an overall staff reduction of X%) or targeted (e.g., switching from expensive oak to much cheaper pine for the production of skateboards).
- You must identify three potential cuts that can be made. There are almost always multiple opportunities for budget cuts in any organization.
- For inspiration, research recent spending cuts in your market sector. What are other companies cutting spending for? Why?
- Using the information from your budget analysis, generate three separate budgets that account for these proposed cuts. Which saves the most money? Which makes the most sense for your business?
- Gather all three budgets into a single document for submission.
- Be prepared to explain and support your decisions in class or in the Budget Analysis Discussion Board.
