Key Benefits of the Business Planning and Budgeting Process

 Hope you all had a great summer.  It certainly was a wet one in the Greater Detroit Area.  The Detroit area is starting to see a little bit of a bounce in the economy from the resurgence of the automotive industry.  This is the time of year that business owners need to continue to focus on the current year but also start thinking about next year.
When we think about the future of your business the Planning and Budgeting Process comes to mind.  Every business has this process, some more formalized than others.   The benefits of planning and budgeting usually will outweigh the effort.  It's like anything else the more you put into it the more one can potentially get out of it.  The following discussion outlines the potential benefits of planning and budgeting.  (Pretty much a list of the typical roles and responsibilities of management.)

Planning in itself forces management to look at the future and anticipate risk and opportunities in the market place.  If one is caught-up in the day to day activity they can miss opportunities in their industry by not paying attentions to trends.  One must also think about how decision you make today will impact the future.

Organizing is a key role of management.  As your business grows organizing it becomes more important in making it operate efficiently.  The planning and budget process helps one to organize economic and human resources in the most financially rewarding areas and efficiently manage these resources.

Controlling involves investigating variances from established targets and taking corrective action.  This activity serves as an internal control over your business and helps identify when you may have to make some changes to the budget because things may not always go as planned.

Coordinating is derived from planning and budgeting.  Planning and budgeting serves as a system to coordinate the activities of the different departments,  bringing them together so everyone is on the same page.

Communication is a byproduct of planning and budgeting.  It forces the organization to exchange information, ideas and achievements.

Motivation can be gained by the planning and budgeting process.  Having realistic goals and the thrill it gives when they are achieved can be a motivating factor.

Clarity is achieved if rewards and accountability are tied to your planning and budgeting process. 

As one can see planning and budgeting incorporates a lot of the roles and responsibilities of management. Look for my next next blog when I will discuss key steps in a formalized budget and planning process.

Thank you for your time.  Please contact  me should you have any questions concerning the above information or if I can assist you with your Planning and Budgeting Process.

Best regards,

Andrew Jordan, CPA, MSF