Elements of an Effective Business Planning and Budgeting Process

In my last posting I discussed the importance of having a Planning and Budgeting Process for your business.   Every business has this process some more formalized than others.  The following is a list of the universally accepted elements to an effective business planning and budgeting process.

Develop or revisit the mission statement for the organization and each department.  Define or revise the reasons for existence.

Develop or revisit the company vision statement.  Articulate your vision for the company and what you want to be.  An analysis of the company's strengths, weakness, opportunities and threats (SWOT) can be an effective tool for developing the company vision.

Review and update the company business model. Changes in the market place or for example new opportunities may require one to updates how you create or deliver the value that your customers want.

Update or develop a long-range or strategic plan.  Capitalize on your brand, experience, etc. to develop your strategic advantage to increase sales, margins, market share, etc.

Update or develop the overall product/service plan.  Look at your product and or service offerings and update them according to the strategic plan.

Develop the current year's operating plan.  Write-out the general budget targets that will be met during the next twelve months.

Assign specific goals and objectives with individual action plans.  Define who's responsible for each detailed and measurable action plan.

Develop the detailed operating and capital budgets.  Amount of expense and capital expenditures are detailed by cost and profit centers.

A timely and accurate reporting system should be in place to monitor the results.  An evaluation and assessment of the process should periodically be made.

The payoffs from a well-structured planning process can be significant.  Planning can insure that one has a profitable and successful business with a viable future.  It can also help with providing a clearer direction and purpose, communication, dealing with rapid change and unknowns, accountability and control.  Good luck.  I would be pleased to get input from businesses on how they implement their planning process.  Feel free to comment or contact me. Thanks.

Andrew Jordan, CPA