Advantages of Annual Planning

In the business world, we often hear about strategic planning and the desired path for the company over five years. However, the advantages of annual planning are not as popular of a topic. More importantly, it was found that over 50% of employees do not know what is expected of them.


Annual planning is a tool to close this gap and set clearly defined expectations for business units and departments. Annual plans essentially path the roadmap for your organization, department, or unit for the year, which ties to the strategic plan. By setting annual 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 plan 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 back at its previous year, identify improvement areas, and align such activities and resources to the overall strategic plan. The annual plan 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 we are going and how we are going to get there.


Annual planning process


1. Alignment with strategic plan


To begin the annual 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.


2. Conduct current business assessment


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


3. Operational and financial forecast


Create forecasts for sales, cost of sales or cost of goods sold, staffing needs, and operational expenses, which ultimately become your budgets.

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 requirements and other resource requirements. Contingency planning begins during the forecast stage and finalizes during the action plan development stage.


4. Develop action plans after recommitting to 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 overall annual plan 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 of the organization. Furthermore, from a contingency planning standpoint, sources of capital and reserves should be identified and secured.


5. Manage the annual plan during execution


Once the execution begins of the annual plan, it is critical to standardized reporting structures to track action plans and measure results. More importantly, listen to your customers and ensure that your customer loyalty is strong.


Advantages of annual planning


· Reinforces the organizational mission

· Provides alignment with strategic plan

· Sets clear expectations and direction for staff and departments

· Establishes short-term goals and actions

· Sets timelines and deadlines

· Promotes continuous improvement principals

· 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 would like to learn more about the annual plan and annual planning process, please reach out to us at sales@westportbusmgmt.com. We are ready to help you and your company move forward in 2022.


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