Business Planning

To be successful, all organizations require a business plan. Business planning and controlling are critical functions that should be part of every enterprise. Unfortunately, in many situations, any planning is limited to that supporting a budget, such as financial and sales forecasting.

Performance comparisons are commonly done at the end of fiscal periods using accounting reports and budget forecasts. However, looking back at performance does not allow for corrective actions at the time when the process started to drift off track.

An ideal planning function within an organization includes the following:

  1. Definition of goals and objectives.
  2. Development of strategic and tactical plans and the provision of tools to allow for the preparation of financial and operational reporting.
  3. Definition of the products, services, and markets to be pursued.

In other words, planning is the process of defining objectives, the resources needed to attain those objectives, and the policies which will govern the pursuit of those objectives.

The formulation of long-range strategic plans and policies is crucial to an organization. Long-range plans should reflect the mission statement of the organization, and all other plans should be consistent with them. The mission statement should be concise and answer why an organization exists, what it offers, and where it wants to go.

Components of a Business Plan

There are several essential elements to every business plan. Some are emphasized more depending on the nature of the organization, but in general the following areas must be covered.

  1. Description of the Business
    What makes the business unique and what are its specific goals?
  2. Products and Services
    What products and services will be provided and what costs will be involved? What profits can be expected? Will patents and other legal protection be needed?
  3. Market Analysis and Strategy
    What are the target markets and customers, and how will the be penetrated? How much of those markets can be dominated?
  4. Competition
    Who will be the major competition and where will they be?
  5. Management
    What will be the management structure? What skills and disciplines are your available and how will the gaps be filled?
  6. Risks
    What are the key elements for success or failure? What are the contingency plans if the situation changes?
  7. Financial Plans
    What kind of financing will be needed and by when? What are the profit objectives? How will expansion be financed? What financial controls will be in place?
Controlling Management Plans

There would be no need for control if there were no goals or objectives. Almost all organizations have some controlling mechanism in place usually developed around accounting budgets. In the absence of any business plans, the focus evolves around fiscal expenditures and thus the position Controller exists in most organizations.

The function of controlling is to monitor all plans and budgets to provide for intervention when necessary to redirect strategies or operations toward the accomplishment of set goals. The primary element for monitoring progress is real time reporting. That is, reporting accurate and timely enough to permit for effective corrective actions when necessary.

The tools for controlling an organization are the various financial reports that are made available to management on some regular basis. Modern computerized accounting packages have greatly simplified the task of preparing the these reports and a large variety of powerful accounting tools are now available to even the smallest enterprise.