The way that you report financial information should be the way that you present your plan.

GATHER THE INPUTS, START THE PROCESS.

When it comes to planning, there is no single action that one can point to that’s going to have this magic bullet outcome. Good plans are the collection of a series of inputs.

So if I were to give advice to a group that were embarking on a planning exercise for the first time, I would say to them, get as many inputs as you can. Understand how those inputs intersect and compile a plan that is the collective input of as many people within your group as have an ability to provide useful input, and then come up with a cohesive plan.

WHO IS RESPONSIBLE FOR WHAT? ACCOUNTABILITY?

One of the common misperceptions that people have about a business plan is that it’s finances’ business plan. If the planning process doesn’t include the whole team, then there’s an absence of accountability where accountability needs to lie.

So when one thinks about the planning process, if I were to define the different roles the operations team and the senior marketing and sales team, they’re each responsible for certain elements of that plan. Sales is responsible for the forecasts. Marketing is responsible for how we’re going to deliver that forecast in terms of go to market distribution and so on. And operations is responsible for the cost of delivering that forecast. Finances’ is role is actually supposed to be the least ownership driven because they’re just supposed to compile it. If you don’t get those accountabilities right, you’re going to have a very difficult time managing the results against that performance.

THE ROLE OF THE BOARD.

The role of the board in any planning cycle is to approve. It is to ask the difficult questions, to test the assumptions, to really press people, to make sure that it’s a reasonable and acceptable plan given the cost of capital, given shareholder requirements, given obligations to lenders. The board’s job is to make sure that we get it right.

BUDGETING & REFORECASTING … THE YARDSTICKS

So there are two elements to sort of the planning process and or cycle within an organization.

There’s the budget. The budget is typically something that’s approved by the board of directors and or approved by the existing management and that’s what you’re holding accountable to the entire team for the full year. But as you progress during the year, you might have to recalibrate.

And so what we do typically on a quarterly basis is reforecast. Maybe you heard me talk about intervals and measurements and fail fast and all the other terms, but free forecasting is where you’re taking a closer look at where you are today in light of new information,and that allows you to continually recalibrate how you’re going to deal with or address those issues.

MANAGEMENT REPORTING. MEASUREMENT AGAINST PLAN.

The way that you report financial information should be the way that you present your plan.

And it’s really important that every month, or however frequently you choose to review budgets versus actuals, when looking at those actuals against the budget that they map up, and they map up at a level of detail that allows you to examine the reasons for achieving the target and or not achieving the target, whether that’s even exceeding it or coming in below it, because sometimes exceeding target at a given point in time may just be timing. And so it may not be cause for celebration partway through the year, where you have the timing of a critical sale and you start sort of going, yeah, we’re way ahead of plan but the truth is you just had a timing benefit and it’s going to kind of course correct itself in the next quarter.

So, it’s really important that the way you plan and the way that you present your plan is consistent with the way that you capture actual financial information. That’s a job for your finance team. Their job is to make sure that planning is at a level of detail that allows them to look at the actuals at a sufficient level of detail to drive decisions.

THE BLUEPRINT.  HOW DO WE USE THE PLAN?

I used to run a half billion dollar organization, and I used to have my 10 or 12 direct reports come to meetings once a week for what we called Exco, executive committee meetings, and I would always walk in with the very detailed business plan. It was, in our case, assembled in a binder and I used to walk in with that book, almost symbolically, so that the team knew that as we were talking, I’d be flipping through the plan to their sections and to their relevant part of the conversation for today, that associated itself with the original budget, and we would have conversations that allowed us to take today’s decisions and compare them to yesterday’s plans. Well, we couldn’t have done that without a well-structured plan because that plan was built as an actual blueprint for how we were going to run the business.  When people were talking about what’s happening in the business today, we were able to associate it.

I would say to folks who are using planning, don’t just treat it as a tick in the box. Use it as a working, breathing document, and that only happens if it’s well put together.

FINAL THOUGHTS

The most costly mistake is a loss of confidence of stakeholders and that loss of confidence of stakeholders, stakeholders being defined as either your bankers, your board, your shareholders, or your employee stakeholders, and in some cases, even your customers, and

a badly put together plan or a plan that’s not executed well can lead to that loss of confidence.

And it probably will lead to the biggest single cost, because you need the support of those stakeholders to ensure the viability of the business going forward. So you don’t do planning right,  you don’t communicate your plan effectively, you don’t implement your plan according to the expectations that you set when you delivered that plan and it could cost confidence. That’s very expensive.