September 25, 2020

SB-Accounting

Accounting + Finance Blog

“Plan, plan and plan” is a business mantra you absolutely need

"Plan, plan and plan" is a business mantra you absolutely need
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Business mantra keeps the business going for a long time. One of such is plan, plan and plan. This mantra may have been stated by Collins Willis in one of his articles. What is planning and what does it entail.

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What really is planning?

Planning is a process of setting out ways in which a business goal can be achieved.

What is a plan?

A plan is a blueprint or a statement of how an entity wishes to achieve its goals and objectives.

Why is a plan important for a business?

A plan is a direction or a pathway to follow to achieve success. It is similar to a compass. A compass guides the adventurer to his or her distinction.

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Without planning a man, woman, family or business may not achieve its goals. This is true because there is no direction. The wave of life will toss the person or business to different directions and the result may be a failure.

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Failure to plan is also a plan. That is to say, that life is all about planning. A person who fails to plan plans to fail is a clause that can never be forgotten in a hurry when it comes to the term plan.

How to plan

A Twitter user had explained how to plan in a thread.

To plan, you need a budget written in a notebook or in a notepad on your smartphone or computer. Excel budgeting tools can also be useful for planning.

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You can set a daily budget, weekly budget, monthly budget and yearly budget. Many organisations prefer preparing the weekly and monthly budget. Then this budget is multiplied by 52 weeks or 12 months respectively.

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You can have an expense budget, a sales budget, purchases budget, an expenditure budget, a profit or loss budget, a cash flow budget and a balance sheet budget.

A budget helps monitor if the business employees are complying with the business plan. How? At the end of the week or month, variance analysis is done to know if the budget figure is equal to the actual amount spent. A difference is known as a variant.

So, for an expenses budget if the actual amount is higher than the amount budgeted, it is referred to as unfavourable. That is, you have spent more than you have planned to spend.

Also, if the actual amount is less than the budgeted then it is a favourable budget. The reason for monitoring such variant is to know what causes the variants.

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However, if the actual is equal to budget it is a balanced budget.

Why is the budget favourable? Why is it unfavourable? Why is it balanced? Knowing these answers will help improve productivity, efficiency and effectiveness in the use of the business fund.

The plan is an effective way to achieve a business goal. And a roadmap. Failing to plan is planning to fail. This business mantra is important. Keep these in mind and you will succeed.

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