It is that time of year again...
The time when you ask yourself, "we have to plan for 2018 already"? Aside from making a clichés remark that "good managers should always be planning for the future", I too felt like the year went by quickly. Nevertheless, budgeting season is upon us. A time to evaluate our 2017 goals and formulate a strategy for the new year.
So why do we budget anyways, besides to keep our accountants happy? It seems like a fairly simple answer: because we need to plan how we will allocate our resources efficiently.
Yes - that is partially correct. However, an effective budget is looked at as more of a strategic alignment of goals and resources possessed by an enterprise. What segments or departments need additional help, where can we pull some capital to re-allocate to other business areas, what product/service lines will we try to promote next year, and what direction do we want our company to be heading?
See, all valid questions that can be answered when budgeting strategically, rather than treating it as an extensive 'balance sheet of the future'.
So what should we include in our annual plan? The following are strategic elements that are included in a best-practices approach to annual budgeting:
- Your financial performance and forecasts
- Potential changes in customer demographics or operating market
- Details of current investment status or options for future investments
- Information about your organization and management
- A detailed outline of any desired strategic changes or deviance from current organizational direction
- A review of 2017 KPIs (key performance indicators) while defining 2018 KPIs
- Key objectives and goals for the upcoming year
Before we can head into the new year, we must first review our performance from the current year. Starting at the baseline, reviewing analytics and compare the results to desired KPI metrics is a good place to begin. We need to determine how effective our KPIs, which is another way of saying our 'goals', were and if they were ambitious enough.
Yet, there are two types of data. Quantitative (all of the numbers) and qualitative. Qualitative data is often times overlooked, as analytical dashboards have made quantitative data so easy on the eyes, but qualitative data is the best way to hear the direct voice of your customers. Listen to the needs and concerns of your audience, strategically emphasize with them so you are able to mutualistically share a value exchange.
Once you have fully reviewed the current year, it is time to start planning for next year. Nevertheless, this is when it becomes the trickiest. 2017 may have been your company's finest yet, but will that same approach work for 2018? Odds are, some tweaks will need to be made.
Technology and industries are advancing so rapidly, organizational leaders must stay ahead of new trends to understand how their consumers will change in the coming years. Now is the time when you take the insights gained from 2017 successes and failures and implement them into a cohesive plan that will allow your organization to continue to grow in the coming year.
Cheers to a great plan for 2018!