Budgets should not be

administered rigidly, but rather

should be adjusted for changing
conditions.
BUSINESS PLANNING

- Forecasting developments for a specific period of time in order to formulate a course of action.
- The course of action is spelled out in a document called the business plan. A business plan is a
brief description of the company’s present practices, has financial analysis, contingency plans,
performance projections. It helps you think through your business in detail, giving insight of the
future if your business.

2 STAGES OF PLANNING PROCESS

1. Strategic planning phase-long term goals are established.

2. Tactical-allocation of production

CATEGORIES OF INFLUENCES

1. External
2. Internal
3. Management

IMPORTANCE OF PLANNING

- identify and allocate scarce resources, risk identification and management.

ROLE OF CONSULTANT

1. Develop the methods of planning.

2. Evaluate the methods for long-range planning.
3. Instruct members of management bout planning.
4. Suggest techniques to be used in the planning process.
5. Play the devil’s advocate. DA is inviting of more opinion about the negative side of decisions.

SEGMENTS OF BUSINESS PLAN

1. Description of the company- Mission statement, history sa company

2. Marketing plan- Markets, Pricing advertising, competition, products/services
4 Marketing Areas
1. Publicity
2. Promotion
 3. Merchandising
4. Market Research
3. Production or operations plan- physical facility, equipment machinery and vehicles, new product
development
4. Personnel plan- management organization, departmental org
5. Financial Plan- working capital requirement, equipment and facility financing

3 projection scenarios

1. Profit and Loss Statement

2. Statement of Financial Position
3. Cash Flow Statement

BUSINESS PLAN CONTENT

I. Cover Sheet
II. Table of contents
III. Executive Summary
IV. Context of the business
V. Profile of the business
VI. Profile of specific market
VII. Anticipated challenges and planned responses
VIII. Marketing plan
IX. Financial Projections
X. Implementation Schedule
XI. Statement of resource needs
XII. Appendix
1. Strategy, plan and budget are unrelated to one another. Do you agree?
Strategy, plans, and budgets are interconnected. Essentially, strategy provides the overall
direction, plans turn that direction into practical steps, and budgets allocate the resources
needed for those steps. Together, they collaborate to achieve corporate objectives and are vital
elements of effective management. Ignoring or misaligning any of these components can lead to
inefficiencies, hindering the organization's overall success.
2. Budgeted performance is a better criterion than past performance for judging managers. Do
you agree?
The decision to use budgeted or previous performance as a criterion for managers' evaluations
relies on the particular evaluation goals and whether a retrospective or forward-looking
viewpoint is required. A balanced strategy that takes into account both factors can offer a more
in-depth and thorough evaluation.
3. How might a company benefit by sharing its own internal budget information with other
companies?
 Looking at budgets from similar companies in the industry helps set benchmarks and find areas
to improve. By sharing successful strategies and best practices in budgeting, companies can
make better decisions and become more efficient.
4. The sales forecast is the cornerstone for profit planning. Why?
A sales forecast serves as a foundation for revenue estimation, helps with expenditure planning,
and determines a company's profitability. Accurate sales forecasting makes the entire profit
planning process more effective, allowing companies to reach their financial goals and make
informed financial decisions.
5. How can sensitivity analysis be used to increase the benefits of profit planning?
Sensitivity analysis helps profit planning by showing how changes in things can affect outcomes.
This helps businesses make smarter decisions, use resources well, and adjust plans to handle
uncertainties in the ever-changing business world.

 The usual starting point in budgeting is to forecast sales demand and revenue.
 Budgets should be adjusted for changing conditions. Changing conditions usually call for a
change in plans.
 It is best to compare this year’s performance with this year’s budget because inefficiencies and
different conditions may be reflected in last year’s actual performance amounts.
 A well-prepared operating budget should serve as a guide for a company to follow during the
budgeted period. A well-prepared operating budget assists management with the allocation of
scarce resources. It can help management see trouble spots in advance, and then management
can decide where to allocate its limited resources.
 The master budget is a series of interrelated budgets that quantify management's expectations
about a company's revenues, expenses, net income, cash flows, and financial position. When
administered wisely, a budget: 1. provides a framework for judging performance,2. motivates
managers and employees, and3. promotes coordination and communication among subunits
within the company.