With inflation a harsh reality and the need for adjustments in our lives, Business Planning is more necessary now than at any other time in history.
It is almost an axiom that when we design something, we will do it better, more efficiently and certainly with less effort and stress. The most fanatics will tell us that a project begins from the moment it enters our minds as an idea.
“Based on William Deming’s theory, the planning of an organization’s actions is an eternal cyclical process, which learns from its past, redesigns its future, resulting in continuous improvement in implementation.
The concept of an organization’s budget is complex and therefore encompasses many things.
It is the process, the implementation, the organization, the information, the knowledge, the valuation, the evaluation of structures and practices, the sensitivities of the numbers, the way of thinking, and the documentation of the decision. The budget is not only the prediction of the numbers, but under certain circumstances and their creation. Yes, exactly.
“So don’t just stop at predicting the future, but also proceed to create it, making the necessary changes and adjustments”
Times are strange, and budgets will be tough. We all understand that a storm has begun, a storm that has it all. Rising raw material prices, rising service costs, rising energy costs, questionable fuel efficiency, falling consumption, and negative psychology make up the “perfect storm.”
Another reason to get busy planning for 2023. With the conditions and forecasts that exist today, businesses will have a difficult year in 2023 and the planning process should be both imperative and careful, more than ever.
Having a bad year is part of reality, but not knowing it is a crime. If you know it in advance, you may have the opportunity to change policies and practices, at least those you can influence, so as to optimize the outcome.
The budgeting process, i.e. the collection of data, is perhaps the most important of all. Because it is then that we “take stock” of the current year and use the knowledge and experience of the past to plan our future.
So indirectly we evaluate revenues and expenses, products and services, policies and practices, distribution channels and communication methods.
That is, we review everything that happened in the past in order to be as realistic and productive as possible for future actions. Therefore, all the collaborations we have, whether involving customers or suppliers, are put under the microscope and evaluated.
“Scheduling” is neither a department of a company, nor a box on an organizational chart, nor a lifeless formal process. It is a habit, it is a way of thinking, it is a way of life, it is a culture.
For many, the training and initiation of an organization into this culture is perhaps the greatest advantage of implementing the “annual budget.”
With the completion of a budget, in essence, we have the roadmap for the next year, we have the list of actions and those responsible for them.
“Who does what and by when,” I say, and without that, many things remain in theory or on paper and never get done.
One of the pathologies of mediocre entrepreneurship is that we make decisions based on the instinct we have for our work, and based on an ideal image we have for “our” work, for “our” child.
By completing a proper budget, we will have no surprises. We will know our sensitivities, the best and worst-case scenarios, and at least we will have the time to deal with the negative impacts and take advantage of the positive ones.
So I suggest to all, old, new entrepreneurs and business executives, to adopt the above logic and follow the above process. The obvious advantages of the information and the process will be seen immediately as well as the result in the culture of your organization a little later, …
when everything will have become a habit and a way of life.
