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In the business world, we often hear about strategic planning and the desired path for the company over five years. However, the advantages of yearly planning are less popular a topic. More importantly, it was found that over 50% of employees need to learn what is expected of them.

Twelve-month planning is a tool to close this gap and set clearly defined expectations for business units and departments. Annual plans path the roadmap for your organization, department, or unit for the year, which ties to the strategic plan. By setting yearly goals, deadlines, and clearly defined roles and expectations, your team is setting up for success.

Ben Franklin said it best – “If You Fail to Plan, You Are Planning to Fail.”

What is an annual plan?

An annual plan is a document that contains the specific objectives, goals, deadlines, and expectations for each role in the company for the upcoming year. The program comprises action plans to achieve milestones that ultimately connect to the broader annual business goals for the year.

The annual plan enables a company to look at its previous year, identify improvement areas, and align such activities and resources to the strategic plan. The annual program provides the roadmap for such initiatives as improving operational efficiency, the accuracy of accounting records, or leaning up.

An annual plan outlines and defines where and how we will get there. The annual plan includes financial, tax, and cash flow planning. Creating an annual plan provides financial goals and operational goals.

Your firm’s financial future depends on monthly cash flow and enough money to achieve future goals. Your company’s financial needs will vary year-over-year, and professional help from industry experts can help develop a sound financial plan.

Annual planning process

1. Alignment with the strategic plan

To begin the financial planning process, you first must revisit the strategic plan and ensure any future action aligns with the broader and long-term organizational goals. Revisit your mission, vision, core values, and other essential pieces of your culture and company.

Aligning operations and long-term financial goals with your strategic plan is ongoing. A solid financial plan will provide the outline and budgeting required to create new value in your assets.

2. Conduct current business assessment

Assess how your business is performing versus your plans. Look into each department and assess each cost center’s operational and financial situations. Moreover, consider the external environment for trends impacting your industry and business. This includes suppliers, customers, and other business partners along your value chain.

Your operating environment contains many moving pieces that impact your risk tolerance yearly. Investing your nest egg and money requires sound risk management to ensure your financial situation improves annually.

A comprehensive financial plan evaluates all areas of your firm, including:

• Insurance
• Taxes
• Retirement planning
• Income
• Balance sheet: assets (investments), liabilities (debt), and equity

3. Operational and financial forecast

Create forecasts for sales, cost of sales or goods sold, staffing needs, and operational expenses, which ultimately become your budgets. Tracking progress from your plans to actual performance helps determine future forecasts.

Projecting numbers for the upcoming year is critical for business success. Accordingly, insight from customers, suppliers, and vendors strengthens the accuracy of your projections. This also helps business owners and decision-makers understand cash reserve and other resource requirements. Contingency planning begins during the forecast stage and is finalized during the action plan development stage.

4. Develop action plans after recommitting to the organizational mission and core values

Part of developing action plans includes seeking feedback from the stakeholders, both internal and external. Always keep your customers at the core of your actions. Moreover, before setting any goals or directives for the upcoming year, it is vital to commit to your mission and core values as an organization before the New Year.

During this stage, deadlines, milestones, department-wide plans, and finer detailed plans within the annual program are developed. Budgets and forecasts are set, and each department can set an agenda for the year to meet deadlines and contribute to business goals.

Before the New Year, the annual plan and goals are communicated throughout the organization to strengthen stakeholder buy-in and commitment from all levels. Furthermore, from a contingency planning standpoint, sources of capital and reserves should be identified and secured.

5. Manage the annual plan during the execution

Once the execution begins, it is critical to standardize reporting structures to track action plans and measure results. More importantly, listen to your customers and ensure that your customer loyalty is vital.

Management is one of the most critical aspects of financial standing each year. Future retirement plans depend on the execution of financial plans.

Advantages of annual planning

Financial planning involves tax planning, investment portfolio management, and wealth management for fractional CFO clients. Your financial life is better when we help you eliminate credit card debt, build retirement savings, and grow the emergency fund.

• Reinforces the organizational mission
• Provides alignment with the strategic plan
• Sets clear expectations and direction for staff and departments
• Establishes short-term goals and actions
• Sets timelines and deadlines
• Promotes continuous improvement principles
• Ensures a certain level of fiscal responsibility by setting budgets
• Great annual plans include contingency plans for emergency scenarios
• Creates an opportunity to motivate, empower, and engage employees
• Considers the customers at every step
• Measures what matters to your business

If you want to learn more about the annual plan and the strategic planning process, please get in touch with us at sales@westportbusmgmt.com. We are ready to help you and your company move forward in 2022.

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