® linkedin.com/in/asifmasani/ Budget v/s Annual Operating Plan a Asif Masani® linkedin.com/in/asifmasani/ 2/17 What is a Budget? A budget is a financial tool that shows the resources an organization has available to spend. It is a blueprint for how the company is expected to do business in the next financial year. It forms the basis of business operations in the year ahead. It dictates the decisions relating to + Where to invest + What costs to cut + Where to allocate more resources + Where to focus specific efforts. < Swipe left ) fpnaprofessionals.com4/17 ® fpnaprofessionals.com ‘e Think of Budget as a Map It outlines the financial resources (money) an organization has available. And how they will be used to reach its destination (goals). A map shows the roads and routes to take to reach a destination. Similarly, a budget shows the financial resources and expenditures needed to reach the organization's goals. << Swipe left ® linkedin.com/in/asifmasani/3/17 ® fpnaprofessionals.com What is an Annual Operating Plan (A.0.P) An operating plan is a more comprehensive plan that shows how the organization intends to use those resources to achieve its goals. <<. Swipe left ® linkedin.com/in/asifmasani/® fpnaprofessionals.com S/17 Think of the A.O.P as an Itinerary -The itinerary outlines the destination (goals), the activities (strategies) that will be done at each destination, and the time frame for each activity (initiatives). An itinerary provides the context for the trip and helps ensure that the resources (money) are being used effectively to achieve the goals. ® linkedin.com/in/asifmasani/ . << Swipe left® fpnaprofessionals.com 6/17 1. FinancialPlanv/s ~® Comprehensive Plan A budget is a plan that shows how an organization will spend its money over a certain period of time, usually a year. An AOP, on the other hand, is a comprehensive plan that outlines an organization's objectives, strategies, and initiatives for the upcoming year. ® linkedin.com/in/asifmasani/ . <<. Swipe left® fpnaprofessionals.com m7 2.Level of detail Budgets are more detailed and provide detailed information on how money is being spent and how much is being spent. An AOP is High-level but more comprehensive and provides a broader view of the organization's objectives and strategies. ® linkedin.com/in/asifmasani/ . << Swipe left® fpnaprofessionals.com 8/17 *e 3. Focus A budget focuses on the financial aspect of an organization, An operating plan focuses on the operational aspect. ~~ LT J ® linkedin.com/in/asifmasani/ . <<. Swipe left® fpnaprofessionals.com 97 4. Time Horizon A budget is typically prepared for a single year, While an operating plan may cover a multi- year period. ® linkedin.com/in/asifmasani/ <<. Swipe left® fpnaprofessionals.com 10/17 *e 5. Uses A budget is used to control spending and ensure that resources are being used effectively. An operating plan is used to guide decision-making and ensure that the organization's objectives are being met. ® linkedin.com/in/asifmasani/ . <<. Swipe left® fpnaprofessionals.com TM13 6. Involvement A budget is usually prepared by the finance department and approved by senior management. An operating plan may involve input from a wider range of stakeholders, including department heads and employees. ® linkedin.com/in/asifmasani/ . <<. Swipe left® fpnaprofessionals.com 12/17 7. Monitoring A budget is used to monitor and control spending, while an operating plan is used to monitor progress towards organizational objectives. ® linkedin.com/in/asifmasani/ . <<. Swipe left13/17 ® fpnaprofessionals.com Need forintegration © between Budget & A.O.P A budget without an operating plan is like a roadmap without a destination, An operating plan without a budget is like a destination (goal) without a road map (budget) to support it. By integrating the budget and the AOP, organizations can ensure that: + It has the resources it needs to successfully execute its strategy + Its resources are being used effectively to achieve their goals. ® linkedin.com/in/asifmasani/ . <<. Swipe left® fpnaprofessionals.com 14/17 Example: An organization's operating plan calls for the expansion into a new market; the budget will allocate the necessary resources (e.g. capital expenditures, marketing expenses, and personnel expenses) to support that expansion. ® linkedin.com/in/asifmasani/ . <<. Swipe left15/17 ® fpnaprofessionals.com Conclusion In conclusion, budgets and operating plans are two important financial tools that work together to help organizations effectively manage their finances and achieve their goals. By using both tools in conjunction, organizations can ensure that their resources are being used effectively to achieve their objectives. ® linkedin.com/in/asifmasani/ . <<. Swipe left® fpnaprofessionals.com Join me LIVE in FP&A Masterclass Batch 3 Starting 25 Feb 2023 FP&A Masterclass Live Coaching Program 2 Instructors Focused & Practical Cases & Everything you need . to learn about FP&A DHAWAL PARVATIKAR Asif Masani 4 Weekends Every squarely and Sunday Yamtollam Is 7:30 am GST (Gulf) 2:30 pm AEDT (Australia) . 10:30 pmET (US) ® linkedin.com/in/asifmasani/ . <<. Swipe left® fpnaprofessionals.com FP&A Masterclass : Batch 3 Saturday and Sunday: 9:00 am - 11:00 am IST Session 1: Quick Start to FP&A role Sie ess Session 2: Budgeting & uae Forecasting - Part 1 Session 3 : Budgeting & RIB NIE Ac Forecasting - Part 2 Session 4 : Budgeting & Soe Forecasting - Port 3 iCal Session 5: Management Reporting - 1 Session 6 : Management Crees Raporinae 2 Session 7: Presentations & Ce ane Story Session 8: Finance Business Sra ts Partneileg ® linkedin.com/in/asifmasani/ . << Swipe left® fpnaprofessionals.com Q ® linkedin.com/in/asifmasani/ . << Swipe left® linkedin.com/in/asifmasani/ ave Thank you for reading! Follow me to know more about Financial Planning & Analysis Follow Link to register in the FP&A Masterclass Q https://fpnaprofessionals.com Save for later