This is the time of year when we in the company engage in strategizing and planning for the future.
Never more than at this time when the climate of uncertainty and fear heavily affects future decisions, planning and budgeting activities are of paramount importance.
Why stop and think?
To understand whether “where you are going” coincides with “where you want to go.”
To review the goals set, check whether they are still realistic and achievable, and set new ones.
To see whether the current structure will be able to take us to the achievement of what we are aiming for or whether investments or changes need to be made.
Tools and assumptions
Strategic planning aims to define the company’s mission for the next 3 to 5 years and the strategies planned to achieve it.
The budget is the accounting-administrative document referring to the coming year. It has greater detail than planning in that it must be able to prepare a forecast budget accompanied by the Income Statement, Balance Sheet and Cash Flow Statement.
These two tools should be complementary.
There are certain assumptions that give efficiency to these processes:
- A corporate culture that includes the centrality of communication
- The definition of roles within the company in order to be able to identify who decides, who plans, who executes and who controls and with what resources
- Involving managers to increase motivation, gain valuable information, and measure achievements
- A Controlling function delegated to these activities.
Covid19 effects
To be able to plan, analyses of past management data and the study of different future scenarios, which consider possible events, are essential to model forecast data. Never more essential than now is it establish goals and model different scenarios to achieve them.
The pandemic has only increased the importance of information and the ability to analyze and understand data.
In order to forecast the 2021 data, it is necessary to look at the deviations with the long-term planning that had been done, with the 2020 budget and with the 2020 forecasts, which, because of the pandemic, were subjected to various external factors related not only to markets but especially to policy restrictions that affected the various sectors differently.
Comparison with the expected pre-pandemic data is of paramount importance because these represent the expectations that should be aimed at again in the future.
An alternative way of proceeding that could help a lot at this time is to start with one of the few certain data: fixed costs. Budgeting could be done by starting with costs and defining the break-even point.
Underestimating these activities could have significant impacts on the company’s future performance.
Learn more with the article written by our consultant Silvia Cuter, who will be back in the classroom starting Nov. 26 for the Second Edition of the Controlling Pathway – Regesta Academy.
See the testimony of last year’s participants.
