All businesses benefit from having a structured approach to safety expenditure and resource allocation for meeting the company expenses. Discrepancies arise in safety budget planning either because of unforeseen circumstances or poor planning. In such cases, improper budgets might hamper the safety performance, safety culture and may bring down the company's profit
- Unprecedented events such as the COVID-19 pandemic make budgeting difficult, especially when gauging long-term impact and engaging staff in the budgeting process.
- The first step is to rethink the process and set targets that encourage problem-solving and innovation.
- It is also important to allocate resources to areas of the organization that are most likely to face challenges.
Proper cost control and safety budget planning are especially important in the cases of small and micro-businesses where there are limited resources and overspending is not possible due to limited capital. Efficient cost control management can help you strategically identify the safety priorities and cut back on expenses that are not required immediately. As such, being well-versed in both budget management and cost control techniques can allow you to use your resources to their fullest potential.
It’s a mistake to try to look too far ahead. The chain of destiny can only be grasped one link at a time.”
Sir Winston Churchill
Corporate Safety head in business with the job of looking ahead knows how true this is, particularly in uncertain times, but there are methods that can provide a road map to the future and help them avoid dead ends and potholes.
Most organizations struggle with budgeting because the future is always hard to predict, and managers generally don’t want to make firm on-the-record forecasts, particularly in times of uncertainty.
“There are two intrinsic weaknesses,” “First, there is the inherent difficulty in predicting how the real world will impact the organization in the future. Second, there is the issue of getting managers and employees to engage with this process in an authentic way. Usually, it is a bit of both.”
Companies might face new challenges in creating and maintaining a safety budget for their business.
- Inaccuracies in the data: A business consist of a lot of departments such as human resource, quality, marketing, and production which all have their own expenses. For Ex. to know how many new employees will be joining the organization can define the number of training and the associated cost. But collating a list of expenses for all these departments correctly can be a monumental task. Often there are inaccuracies in the data collected which can have a major impact on the allocation of resources in the budget.
- Lack of modifying: In most cases, businesses create budgets before the start of a fiscal year based on various financial and economic factors at that current time. Companies might have to keep a provision for revisiting the budget this year to meet any uncertain risk in the future.
- Excessive focus on financial outcomes: Since earning revenue and profits is a major component of how businesses measure their growth, most budgets focus on achieving the financial goals of the company and tend to overlook the need of improving the qualitative aspects of the business such as employee engagement, learning culture, or up in the safety maturity ladder. Although these factors may not directly contribute to the growth of business this year, including them in the budget can improve your company’s work performance and stand in the business community in the long run.
- Lack of time to create a budget: Creating a well-organized budget requires careful consideration of a number of factors and this can be very time-consuming. Due to the present situation and with virtual connect many operations many need more attention and you may be left with less time. So the budgeting process can't be left to be completed at the end of a fiscal year like every year, as this may create a shortage of time and resources in the present situation. The result can produce inaccuracies in the budget which can be harmful to your business.
- Unwillingness to change expenditure habits: Most company budgets are usually similar versions of the previous years’ budgets with very few changes. The annual expenditure of different departments sets the tone for their funding in the next budget. This might encourage some departments to indulge in over-expenditure which can waste limited resources, especially in a smaller company.
Forecasting methods are likely to vary across industry sectors, and the team responsible for looking ahead needs to choose the right metrics and the most appropriate time frame.
“No software explains uncertainty,”. We have all the technology we need. What is in short supply is a willingness to embrace uncertainty. When you determine budgets at the start of a period, you know they’re likely to be wrong. If you can accept this and work with it, you’re ready to start thinking about smarter ways of benefitting from a budget.