If you are a member of the management team of a calendar year company, and you’ve not started your budget development for 2022, you’re already late. Remember how last year went? Getting ready for the new year at this point isn’t going to be easy, but it’s going to be even more important that you do it. I can think of no industry whose prospects haven’t been altered by the pandemic, for better or worse. In my view you ignore that reality at your peril.
Here are 4 steps to help you catch up and get it right.
- Review your company’s Strategic Plan to see if it is still relevant in view of the events of the past couple years. With disruptions in supply chains, consumer habits, industries thriving and others struggling to survive, nothing is the way it was before the pandemic. Make sure your long-range thinking is still relevant, even if you think it will now take you longer to get there.
- Review – or develop if you don’t have one – your Operating Plan for 2022. Remember, the operating plan is the narrative description of what you plan to do in the next year to further the goals and objectives spelled out in your strategic plan – one year at a time. And you can’t really begin to develop a budget until you know what you actually plan to do that will need resources. Key: Remember the real purpose of a budget is to define the most efficient allocation of your limited resources. Spending those resources – money and people – in ways that do not further the intentions of the company is a waste of those resources, the sole exception being the unforeseen emergency that requires instant action because you didn’t plan for it.
- Now you’re ready to perform an up-to-date SWOT analysis, identifying those internal strengths and weaknesses, and the external opportunities and threats, that indicate the need to modify your plans before you start allocating resources to them. If hiring is being hampered by the aftereffects of the pandemic, you may not be able to open that office in Austin when you planned. If your product requires materials that are now in very short supply, maybe you won’t launch that new product when you said you would. Best to own that reality up front, and the SWOT analysis is designed to give you a today-focused view of the world in which you do business. Don’t miss this step in your process.
- NOW, you’re ready to begin building your Budget. Once you’ve assigned responsibly down to the cost center level, laid out the timetable to get it done by early December, and defined the top-line issues that you’ve decide must be included in the budget – all in writing – you’re ready to get started on the actual budget. For a thorough description of the process, take an hour or so to review my budget development course on Illumeo.com. Or call me directly.
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