relationship between budget business plan and action plan

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Budgeting and business planning

Once your business is operational, it's essential to plan and tightly manage its financial performance. Creating a budgeting process is the most effective way to keep your business - and its finances - on track.

This guide outlines the advantages of business planning and budgeting and explains how to go about it. It suggests action points to help you manage your business' financial position more effectively and ensure your plans are practical.

Planning for business success

The benefits, what to include in your annual plan, a typical business planning cycle, budgets and business planning, benefits of a business budget, creating a budget, key steps in drawing up a budget, what your budget should cover, what your budget will need to include, use your budget to measure performance, review your budget regularly.

When you're running a business, it's easy to get bogged down in day-to-day problems and forget the bigger picture. However, successful businesses invest time to create and manage budgets, prepare and review business plans and regularly monitor finance and performance.

Structured planning can make all the difference to the growth of your business. It will enable you to concentrate resources on improving profits, reducing costs and increasing returns on investment.

In fact, even without a formal process, many businesses carry out the majority of the activities associated with business planning, such as thinking about growth areas, competitors, cashflow and profit.

Converting this into a cohesive process to manage your business' development doesn't have to be difficult or time-consuming. The most important thing is that plans are made, they are dynamic and are communicated to everyone involved. See the page in this guide on what to include in your annual plan.

The key benefit of business planning is that it allows you to create a focus for the direction of your business and provides targets that will help your business grow. It will also give you the opportunity to stand back and review your performance and the factors affecting your business. Business planning can give you:

• a greater ability to make continuous improvements and anticipate problems
• sound financial information on which to base decisions
• improved clarity and focus
• a greater confidence in your decision-making

The main aim of your annual business plan is to set out the strategy and action plan for your business. This should include a clear financial picture of where you stand - and expect to stand - over the coming year. Your annual business plan should include:

• an outline of changes that you want to make to your business
• potential changes to your market, customers and competition
• your objectives and goals for the year
• your key performance indicators
• any issues or problems
• any operational changes
• information about your management and people
• your financial performance and forecasts
• details of investment in the business

Business planning is most effective when it's an ongoing process. This allows you to act quickly where necessary, rather than simply reacting to events after they've happened.

• Review your current performance against last year/current year targets.
• Work out your opportunities and threats.
• Analyse your successes and failures during the previous year.
• Look at your key objectives for the coming year and change or re-establish your longer-term planning.
• Identify and refine the resource implications of your review and build a budget.
• Define the new financial year's profit-and-loss and balance-sheet targets.
• Conclude the plan.
• Review it regularly - for example, on a monthly basis - by monitoring performance, reviewing progress and achieving objectives.
• Go back to 1.

New small business owners may run their businesses in a relaxed way and may not see the need to budget. However, if you are planning for your business' future, you will need to fund your plans. Budgeting is the most effective way to control your cashflow, allowing you to invest in new opportunities at the appropriate time.

If your business is growing, you may not always be able to be hands-on with every part of it. You may have to split your budget up between different areas such as sales, production, marketing etc. You'll find that money starts to move in many different directions through your organisation - budgets are a vital tool in ensuring that you stay in control of expenditure.

A budget is a plan to:

• control your finances
• ensure you can continue to fund your current commitments
• enable you to make confident financial decisions and meet your objectives
• ensure you have enough money for your future projects

It outlines what you will spend your money on and how that spending will be financed. However, it is not a forecast. A forecast is a prediction of the future whereas a budget is a planned outcome of the future - defined by your plan that your business wants to achieve.

There are a number of benefits of drawing up a business budget, including being better able to:

• manage your money effectively
• allocate appropriate resources to projects
• monitor performance
• meet your objectives
• improve decision-making
• identify problems before they occur - such as the need to raise finance or cash flow difficulties
• plan for the future
• increase staff motivation

Creating, monitoring and managing a budget is key to business success. It should help you allocate resources where they are needed, so that your business remains profitable and successful. It need not be complicated. You simply need to work out what you are likely to earn and spend in the budget period.

Begin by asking these questions:

• What are the projected sales for the budget period? Be realistic - if you overestimate, it will cause you problems in the future.
• What are the direct costs of sales – i.e. costs of materials, components or subcontractors to make the product or supply the service?
• What are the fixed costs or overheads?

You should break down the fixed costs and overheads by type, e.g.:

• cost of premises, including rent, municipal taxes and service charges
• staff costs –e.g. wages, benefits, Québec Parental Insurance Plan (QPIP) premiums, contributions to the Québec Pension Plan (QPP) and to the financing of the Commission des normes du travail (CNT)
• utilities – e.g. heating, lighting, telephone
• printing, postage and stationery
• vehicle expenses
• equipment costs
• advertising and promotion
• travel and subsistence expenses
• legal and professional costs, including insurance

Your business may have different types of expenses, and you may need to divide up the budget by department. Don't forget to add in how much you need to pay yourself, and include an allowance for tax.

Your business plan should help in establishing projected sales, cost of sales, fixed costs and overheads, so it would be worthwhile preparing this first. See the page in this guide on planning for business success.

Once you've got figures for income and expenditure, you can work out how much money you're making. You can look at costs and work out ways to reduce them. You can see if you are likely to have cash flow problems, giving yourself time to do something about them.

When you've made a budget, you should stick to it as far as possible, but review and revise it as needed. Successful businesses often have a rolling budget, so that they are continually budgeting, e.g. for a year in advance.

There are a number of key steps you should follow to make sure your budgets and plans are as realistic and useful as possible.

Make time for budgeting

If you invest some time in creating a comprehensive and realistic budget, it will be easier to manage and ultimately more effective.

Use last year's figures - but only as a guide

Collect historical information on sales and costs if they are available - these could give you a good indication of likely sales and costs. But it's also essential to consider what your sales plans are, how your sales resources will be used and any changes in the competitive environment.

Create realistic budgets

Use historical information, your business plan and any changes in operations or priorities to budget for overheads and other fixed costs.

It's useful to work out the relationship between variable costs and sales and then use your sales forecast to project variable costs. For example, if your unit costs reduce by 10 per cent for each additional 20 per cent of sales, how much will your unit costs decrease if you have a 33 per cent rise in sales?

Make sure your budgets contain enough information for you to easily monitor the key drivers of your business such as sales, costs and working capital. Accounting software can help you manage your accounts.

Involve the right people

It's best to ask staff with financial responsibilities to provide you with estimates of figures for your budget - for example, sales targets, production costs or specific project control. If you balance their estimates against your own, you will achieve a more realistic budget. This involvement will also give them greater commitment to meeting the budget.

Decide how many budgets you really need. Many small businesses have one overall operating budget which sets out how much money is needed to run the business over the coming period - usually a year. As your business grows, your total operating budget is likely to be made up of several individual budgets such as your marketing or sales budgets.

Projected cash flow  -your cash budget projects your future cash position on a month-by-month basis. Budgeting in this way is vital for small businesses as it can pinpoint any difficulties you might be having. It should be reviewed at least monthly.

Costs  - typically, your business will have three kinds of costs:

• fixed costs - items such as rent, salaries and financing costs
• variable costs - including raw materials and overtime
• one-off capital costs - purchases of computer equipment or premises, for example

To forecast your costs, it can help to look at last year's records and contact your suppliers for quotes.

Revenues  - sales or revenue forecasts are typically based on a combination of your sales history and how effective you expect your future efforts to be.

Using your sales and expenditure forecasts, you can prepare projected profits for the next 12 months. This will enable you to analyse your margins and other key ratios such as your return on investment.

If you base your budget on your business plan, you will be creating a financial action plan. This can serve several useful functions, particularly if you review your budgets regularly as part of your annual planning cycle.

Your budget can serve as:

• an indicator of the costs and revenues linked to each of your activities
• a way of providing information and supporting management decisions throughout the year
• a means of monitoring and controlling your business, particularly if you analyse the differences between your actual and budgeted income

Benchmarking performance

Comparing your budget year on year can be an excellent way of benchmarking your business' performance - you can compare your projected figures, for example, with previous years to measure your performance.

You can also compare your figures for projected margins and growth with those of other companies in the same sector, or across different parts of your business.

Key performance indicators

To boost your business' performance you need to understand and monitor the key "drivers" of your business - a driver is something that has a major impact on your business. There are many factors affecting every business' performance, so it is vital to focus on a handful of these and monitor them carefully.

The three key drivers for most businesses are:

• working capital

Any trends towards cash flow problems or falling profitability will show up in these figures when measured against your budgets and forecasts. They can help you spot problems early on if they are calculated on a consistent basis.

To use your budgets effectively, you will need to review and revise them frequently. This is particularly true if your business is growing and you are planning to move into new areas.

Using up to date budgets enables you to be flexible and also lets you manage your cash flow and identify what needs to be achieved in the next budgeting period.

Two main areas to consider

Your actual income  - each month compare your actual income with your sales budget, by:

• analysing the reasons for any shortfall - for example lower sales volumes, flat markets, underperforming products
• considering the reasons for a particularly high turnover - for example whether your targets were too low
• comparing the timing of your income with your projections and checking that they fit

Analysing these variations will help you to set future budgets more accurately and also allow you to take action where needed.

Your actual expenditure  - regularly review your actual expenditure against your budget. This will help you to predict future costs with better reliability. You should:

• look at how your fixed costs differed from your budget
• check that your variable costs were in line with your budget - normally variable costs adjust in line with your sales volume
• analyse any reasons for changes in the relationship between costs and turnover
• analyse any differences in the timing of your expenditure, for example by checking suppliers' payment terms

Original document, Budgeting and business planning , © Crown copyright 2009 Source: Business Link UK (now GOV.UK/Business ) Adapted for Québec by Info entrepreneurs

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Blog Beginner Guides What is an Action Plan & How to Write One [With Examples]

What is an Action Plan & How to Write One [With Examples]

Written by: Danesh Ramuthi Oct 26, 2023

An action plan is a meticulously structured strategy that pinpoints specific steps, tasks and resources vital to turning a goal into reality. It is extremely useful in any project management. 

Crafting an action plan is like plotting a route for a cross-country journey. It’s the strategic map that outlines every step, decision and pitstop needed to reach your ultimate destination.

With a well-thought-out action plan, you’re not just shooting in the dark; you’re making informed, purposeful strides towards your goals. Dive deep with our guide and witness real-world examples that will inspire and guide you.

Need a tool to kickstart your planning? Try out the Venngage business plan maker and explore their extensive collection of action plan templates .

Click to jump ahead: 

What is the purpose of an action plan?

When to develop an action plan, 7 components of a actions plan, 15 action plan examples.

• How to Write an action plan?

Final thoughts

An action plan serves as a strategic tool designed to outline specific steps, tasks and goals necessary to achieve a particular objective.

Its primary purpose is to provide a clear roadmap and direction for individuals, teams or organizations to follow in order to efficiently and effectively accomplish their goals. 

Action plans break down complex projects into manageable, actionable components, making it easier to track progress and stay on course.

Moreover, action plans play a crucial role in fostering accountability and coordination among team members. By assigning responsibilities and deadlines for each task or milestone, they ensure that everyone involved is aware of their roles and the overall timeline, reducing confusion and enhancing teamwork. 

Additionally, action plans help in resource allocation, budgeting and risk management by enabling stakeholders to identify potential challenges and plan for contingencies. 

Overall, the purpose of an action plan is to transform abstract goals into concrete actions, making them more achievable and measurable while ensuring that the resources and efforts are aligned with the desired outcomes.

Developing an action plan is crucial when you’re looking to achieve a specific goal or outcome. Here are instances when you should consider developing an action plan:

• Start of an organization : Ideally, an action plan should be developed within the first six months to one year of the start of an organization. This initial plan lays the groundwork for the future direction and growth of the entity.
• Project initiation : At the start of any project, an action plan helps to clearly define the tasks, responsibilities, and timelines.
• Goal setting : Whenever you or your organization sets a new goal. Action plans transform these goals from abstract ideas into concrete steps.
• Strategic planning : For long-term visions and missions, action plans break down the journey into manageable pieces, each with its timeline and responsible parties.
• Performance improvement : If there are areas where performance is lacking, whether it’s personal or organizational, an action plan can outline the steps needed to elevate performance.

An action plan is a detailed outline that breaks down the steps necessary to achieve a specific goal. Here are the typical components of an action plan.

1. Objective or Goal

The cornerstone of your action plan is the objective or goal. This should be a clear and concise statement outlining the desired outcome or result. Having a well-defined objective provides a direction and purpose to the entire plan, ensuring all tasks and actions are aligned towards achieving this singular aim.

2. Tasks or Actions

Once the objective is set, the next step is to list down the specific tasks or actions required to achieve this goal. These tasks should be broken down into detailed steps, ensuring no essential activity is overlooked. The granularity of these tasks can vary based on the complexity of the goal.

3. Set deadline

For each task or action, set a realistic and achievable deadline. This timeline ensures that the plan stays on track and that momentum is maintained throughout the execution. It also allows for monitoring progress and identifying potential delays early.

4. Resources needed to complete the project

It’s crucial to recognize and list the resources you’ll need to complete the tasks. This can encompass financial resources, human resources, equipment, technological tool, marketing planning software or any other assets. Identifying these early ensures that there are no bottlenecks during execution due to a lack of necessary resources.

5. Person responsible

Assign a person or a team for each task. This designation ensures accountability and clarity. When individuals are aware of their responsibilities, it reduces overlap, confusion and ensures that every task has someone overseeing its completion.

6. Potential barriers or challenges

Every plan will face challenges. By anticipating potential barriers or obstacles, you can be better prepared to address them. This proactive approach ensures smoother execution and less reactionary problem-solving.

7. Measurement of key performance indicators (KPIs)

Determine how you’ll measure the success of each task or the plan overall. KPIs are tangible metrics that allow you to gauge progress and determine whether you’re moving closer to your goals and objectives. They offer a quantifiable means to evaluate success.

Action plans serve as blueprints, guiding the steps and resources needed to achieve a specific goal. 

They come in various formats, tailored to different scenarios and objectives. Here, we present a range of action plan examples that cater to diverse purposes and situations. 

From business strategies to simple task lists, these examples illustrate the versatility and importance of well-structured planning.

Business action plan example

A business action plan is essentially a strategy roadmap, meticulously tailored for realizing broader business objectives. By crafting a solid action plan, businesses can channel their resources, manpower and strategies in a direction that harmonizes with their larger vision.

Key to this plan is the identification and alignment of steps that resonate with the company’s comprehensive strategy, ambitions of growth and aspirations for operational enhancements. 

While this might entail a myriad of specific steps based on unique business goals, some common elements include setting clear key performance indicators (KPIs), undertaking a thorough SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to grasp the current business landscape and establishing a timeline to keep track of progress.

Furthermore, allocating responsibilities to team members or individuals ensures that every aspect of the strategy has a dedicated focus. Budgeting, essential to the success of the action plan, ensures that every initiative is financially viable and sustainable. 

Regular reviews and iterations based on feedback and changing market dynamics keep the action plan agile and relevant.

Related: 5 Steps to Create an Actionable Employee Development Plan [with Templates & Examples]

Company action plan example

A comprehensive company action plan serves as the strategic linchpin, ensuring a coherent and coordinated approach to realizing organizational goals. Central to this plan is the incorporation of rigorous market research and analysis, which provides insights into consumer behaviors, market trends and potential opportunities. 

Equally vital is the focus on product development and procurement, ensuring that the offerings align with market demands and stand out in terms of quality and relevance. 

Alongside, adept legal and financial management safeguards the company’s interests, ensuring compliance with regulations and prudent fiscal oversight.

Moreover, the essence of any successful company action plan lies in its sales and marketing strategies. These define how the products or services are positioned and promoted in the market, ensuring visibility and engagement with the target audience. 

However, while acquisition is crucial, retention plays an equally significant role. Hence, impeccable customer service and nurturing relationships become indispensable components, fostering loyalty and ensuring that clients remain ambassadors for the brand long after the initial transaction.

Related: 30+ Project Plan Examples to Visualize Your Strategy (2023)

Sales action plan example

A well-structured sales action plan serves as the backbone for systematic and efficient progress. Central to this plan is the identification and utilization of the most effective sales channels, whether they are direct, online or through third-party avenues. 

Clarity on the products and services on offer, combined with their unique selling propositions, facilitates tailored and resonant sales pitches. 

Budget considerations ensure that resources are judiciously allocated, balancing the act between expenditures and potential returns. This financial prudence is complemented by setting realistic sales projections, which act as both a motivational target and a yardstick for success.

Timelines, or proposed deadlines, infuse the process with a sense of urgency, ensuring that the momentum of the sales drive is maintained. 

However, the true measure of the action plan’s efficacy lies in its key performance indicators (KPIs). These metrics, be it lead conversion rates or customer retention figures, serve as tangible markers, highlighting the plan’s strengths and signaling areas that might require recalibration to increase sales.

Corrective action plan example

The essence of a corrective action plan lies in its meticulous structure, tailored to address and rectify deviations or inefficiencies identified within an organization. At its core, each action item serves as a focal point, detailing specific areas or processes that require intervention. 

Accompanying each action item is a clear description that provides a comprehensive understanding of the issue at hand. 

However, merely identifying a problem isn’t enough; delving deep into its origins through root cause analysis ensures that solutions target the fundamental issues, rather than just addressing superficial symptoms. 

This analysis then paves the way for defining the corrective action, a tangible step or series of steps designed to mitigate the identified problem and prevent its recurrence.

Besides, to ensure the plan’s effectiveness, assigning a responsible person to each action item is paramount. This individual or team is entrusted with the task’s execution, ensuring accountability and focus. 

The status of each action keeps stakeholders informed about the progress, be it in the planning phase, ongoing, or completed. 

Lastly, setting a due date for each corrective action introduces a sense of urgency and purpose, ensuring that issues are addressed in a timely manner, minimizing disruptions and maximizing operational efficiency.

Simple action plan example

A simple action plan strips away the layers of complexity, offering a concise and direct approach to achieving a goal or addressing an issue. This type of plan is characterized by its straightforward structure, devoid of extraneous details, yet powerfully effective in its clarity. 

It is specifically designed for tasks or objectives that don’t necessitate elaborate strategies or multi-layered approaches.

The core components of a simple action plan usually include a clear statement of the task or objective at hand, followed by a sequence of actions or steps to be taken. 

Each step is described succinctly, ensuring that anyone involved has a clear understanding of what is expected. Responsibilities are defined clearly, with each task allocated to an individual or a team, ensuring accountability. Timelines might be integrated, providing a clear framework for completion, even if they’re just broad milestones. 

Regular check-ins or assessments, although minimal, might be incorporated to monitor progress. 

The beauty of a simple action plan lies in its agility and adaptability, making it particularly suited for individual projects, short-term tasks or situations where a rapid response is required.

How to write an action plan?

Creating an effective action plan is a foundational step towards turning aspirations into tangible results. It provides a clear roadmap, ensuring that each step taken aligns with the overall objective.

Whether you’re aiming to enhance a business process or achieve a personal goal, a well-drafted action plan can be your guiding light. Here’s key steps on how you can craft one:

• Step 1: Establish SMART goals: Initiating with a goal that is specific, measurable, achievable, relevant and time-bound ensures you have a clear and focused endpoint in sight. Smart goals serves as the cornerstone for your entire strategic blueprint.
• Step 2: Determine necessary tasks: Decompose your overarching objective into smaller, actionable tasks. This modular approach not only makes the mission less daunting but also provides a sequential pathway to goal attainment.
• Step 3: Assign essential resources: Depending on the tasks at hand, designate necessary resources, be they human, financial or technological. This ensures that every activity has the backing it needs for successful execution.
• Step 4: Prioritize tasks by importance: Not all tasks hold equal weight. Determine the hierarchy of tasks based on their impact on the goal and their time sensitivity. This allows for a systematic progression.
• Step 5: Outline timelines and key markers: With tasks in hand, set clear deadlines for each. Introduce milestones, which act as periodic check-ins, ensuring you’re on track and allowing for celebrations of smaller victories.
• Step 6: Oversee and modify your strategy blueprint: As you progress, there will invariably be learnings and challenges. Regularly review your plan to make necessary adjustments, ensuring its relevance and effectiveness.
• Step 7: Consider ready-to-use templates: If starting from scratch feels overwhelming, lean on structured templates to guide your planning. There’s plenty of business plan softwares and platforms such as  Venngage that offer a plethora of action plan templates , tailored to various needs, which can significantly streamline the process.

An action plan is more than just an action steps, it’s a strategic blueprint that bridges the gap between aspirations and realizations. 

Through this comprehensive guide, I’ve walked you through the purpose, ideal timings, core components, and practical examples of action plans across various domains. 

Leveraging tools of project management , you can track progress, assign tasks and ensure every team member stays on the same page. 

It’s not just about setting goals, but about strategically planning every step, ensuring tasks completed align with the larger project goals. 

Remember, success isn’t just about having goals but about charting the right course to achieve them

And if you’re looking to supercharge your planning efforts, don’t miss out on the Venngage business plan maker. 

Dive into their extensive collection of action plan templates and make your strategic planning both efficient and effective. 

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How to Master the Fine Art of Business Planning and Budgeting

Updated on: 5 January 2023

Starting a business is a challenging thing: you have to work hard and do your best to ensure its success. However, the work doesn’t end even when your business actually becomes operational. You still have to do so much more to ensure that it will keep on track.

Of course, it could be hard, especially for the beginners. It seems that you have to keep an eye on so many things and focus on so many urgent tasks every day that there isn’t any time left for business planning and budgeting. However, it is very important to find that time, because business planning and budgeting are actually one of the most important things for business success.

Why so? Because a plan allows you to get a better understanding of how you see your business, how you want to develop it, and so on. When you create a plan, you set targets that you want to achieve as well as define the ways of evaluating the success of your business.

Basically, planning gives you all the necessary tools that you can use to improve your business in the nearest future. However, this happens only when planning is done correctly.

What to Include in Your Annual Plan?

If you want to create a perfect business plan, you have to know what has to be included in it and how big it will be. Of course, there are no strict limitations to a size of a business plan as each business is different. However, if you are doing it for the first time, I recommend starting with a yearly plan: it is not too big and not too short.

A good annual plan has to include the following things:

• an executive summary
• a list of products and services you offer (or plan to offer this year)
• a detailed description of your target market
• a financial plan
• a marketing plan as well as a sales plan
• milestones and metrics
• a description of your management team

In order to write it in the best way possible, you need to spend some time thinking about the current status of your company as well as how it should look like by the end of the year. Describe your target market, think about the goals that have to be achieved this year, about the products and services that have to be launched.

Visualize the information to make it easier for you to see the whole picture (this is especially important for those, who don’t have much experience in planning). You can use charts, and different diagram types such as mind maps to visualize and organize your ideas and plans.

Try choosing a few main goals for your company and add them to the annual plan being as specific as possible: for example, if you want to increase your earnings, you should specify by how much (10%, 15%, etc.). It’s also good to think about the obstacles you might face and come up with some ways to minimize the potential risks that could occur.

Remember that while a business plan has to be specific and detailed when you write it, it shouldn’t remain static by the end of the year. No business is predictable enough for this to happen: you should understand it and prepare to act quickly, adding changes to a business plan if something unexpected happens.

Business Planning Cycle

As I said, typical business planning isn’t a static thing – actually, it’s a cycle that usually looks like this:

• You take some time to evaluate the effectiveness of your business. In order to do so, you should compare its current performance with the last year’s one – or with targets set earlier this year.
• Then you have to think about opportunities that might appear as well as the threats you might face.
• Remember about both successes and failures your business experienced throughout last year. Analyze them and think what can be done to repeat/avoid them.
• Think of the main business goals you would like to achieve and be sure to add them to the new annual plan (or edit the old one according to them).
• Create a budget.
• Come up with budget targets.
• Complete the plan.
• Be sure to review it regularly (every month, every three months, etc.), making changes if necessary.

Repeat the whole cycle.

Business Planning and Budgeting

When a business is still small and growing, it might seem unnecessary to plan its budget. However, it’s crucial if you want to avoid financial risks and be able to invest in opportunities when they appear.

Moreover, with the rapid growth of your business, you might find yourself in a situation where you aren’t able to control all the money anymore. Expansion of the business usually includes the creation of different departments responsible for different things – and each of these departments needs to have its own budget.

As you see, the bigger your business becomes, the more complicated it gets. While it’s okay to not control every cent by yourself, it is still up to you to make sure that your business keeps growing instead of becoming unprofitable. That’s why it’s so important to create a budget plan that allows you to understand the exact income your business brings by the end of the month and the amount of it, you are able to save or spend on different things.

It is important to remember that a business plan is not a forecast in any way. It doesn’t predict how much money you’ll make by the end of the year. Instead, it’s a tool for ensuring that your business will remain profitable even after covering all the necessary expenses.

Moreover, a business plan also ensures that you’ll have the opportunity to invest money into future projects, fund everything that has to be funded this year, and meet all of the business objectives.

Benefits of a Business Budget

The whole budget planning has a lot of benefits:

It allows you to evaluate the success of your business: when you know exactly how much profit your business gave you at the beginning of the year, you are able to compare it with the profit by the end of the year, understanding whether your financial goals have been met or not.

It allows managing money effectively: for example, if you save money for predicted one-time spends, you won’t be caught by surprise by them.

It helps identify the problems before they actually happen: for example, if you evaluate your budget and see that the income left after covering all the expenses is quite small, you’ll understand that you need to make more profit this year.

It helps make smarter decisions, by only investing money that you can afford to invest.

It allows you to manage your business more effectively, allocating more resources to the projects that need them the most.

It helps in increasing staff motivation.

Basically, when you have a budget plan ready, you have your back covered.

How to Create a Budget?

There are so many articles written on how to create a perfect business budget, but most of them narrow down to these 5 simple things:

• Evaluate your sources of income. You have to find out how much money your business brings on a daily basis in order to understand how much money you can afford to invest and spend.
• Make a list of your fixed expenses. These ones repeat every month and their amount doesn’t change. Some people forget to exclude the sum needed to cover these expenses from the monthly income, but it’s important to do so in order to get a clear understanding of your budget.
• Don’t forget about variable expenses. These ones don’t have a fixed price but still have to be paid every month. Come up with an approximate sum you’ll have to pay and include it in your budget.
• Predict your one-time expenses. Every business needs them from time to time, but if you plan your budget forgetting about these expenses, spending money on them could affect it greatly and not in a positive way.
• When you list all the income and expense sources, it’s time to pull them all together. Evaluate how much money you’ll have each month after you cover all these expenses. Then think of what part of that sum you could afford to invest into something.

While a whole process of budget creation might seem too complicated, you still should find time to do it. It’s totally worth the effort – moreover, such a plan could help you not only throughout the next month but also throughout the next year (if your expense and income sources won’t change much).

Of course, it’s still important to review it from time to time, making changes when necessary. However, the review process won’t be as complicated as the creation of a budget plan from scratch.

Key Steps in Drawing up a Budget

If you’ve never created a budget plan before, you could make some budgeting mistakes . However, when it comes to financial planning, the smallest mistake could have a negative impact. The following tips can help you easily avoid most mistakes, making your budget plan more realistic.

• Try to take it slow

The more time you spend on budgeting, the better it is for you. It’s hard to create a flawless budget plan quickly: there’s a big chance you might miss something. That’s why it’s vital to make sure that you’ve listed all the sources of your income and expenses, and are prepared well.

• You can use last year’s data

Last year’s data could help you see the whole picture better: you can compare it with this year’s data, finding out whether your income has increased or decreased. However, you should use it only for comparing and as a guide. You have new goals and resources this year, and the environment you’re working in has changed too, so your current planning and strategies should differ from the ones you used last year.

• Make sure that a budget is realistic

The most important thing about a budget plan is that it has to cover not only predictable expenses but also less predictable ones. Of course, making predictions is hard but using previous data along with some other business plans as examples could make the whole process easier.

A budget also has to be detailed: the information it contains has to allow you to monitor all the key details of your business, be it sales, costs, and so on. You could also use some accounting software for more effective management.

• It’s okay to involve people

If your business is big enough, you probably have some employees responsible for a part of the financial operations. It’s good to involve them in a budget creation process too, using their knowledge and experience to predict some expenses, for example. If the people you involve are experienced enough, the combination of their professionalism and your knowledge will make a budget more realistic and effective.

• Visualizing helps

Various charts and diagrams are so popular in business for a reason: they allow tracking your incomes and expenses easily. For example, you can create one chart based on your plan and another chart based on an actual budget and compare them during planned revisions to see whether your budget plan works just as expected or not.

As I mentioned above, it’s easier to control finances when you are running a small business. Such business needs only one budget that is created for a certain period – in most cases, for a year. Larger businesses, however, require something else. They have various departments, so it is better to create several budgets at once, tailoring each of them to a certain department’s needs.

Don’t Forget to Review!

I’ve already mentioned that a review is an important process of every business planning and budgeting. No matter how good your plan is, it is impossible to predict everything with 100 percent accuracy. Your business will grow and the environment around it will change, so the quicker you’ll react to such changes, the better it is for you.

That’s why you should schedule budget reviews from time to time. I recommend starting with reviewing it every month and then switching to a more comfortable schedule. Every month review can help you notice the flaws of your plan (which is especially important if you don’t have much experience in this kind of thing) as well as understand how stable your business is.

If you see that you don’t have to make changes often, you could start reviewing your plan every three or six months (however, I recommend doing it more often).

You can use various common diagrams to help you . The best thing about diagrams is that they help visualize data well, which is very important when you need to see the whole picture more clearly – and this happens often during budget planning. For example, a diagram or a chart of your company’s income can show you how much your finances have grown during a certain period. Moreover, if you notice certain downfalls in a chart (that aren’t predicted), you’ll be able to react to it quickly, fixing things that went wrong.

What do you need to consider during the whole review process? First, your actual income. Probably it will be different each month: every business has its own peak sales periods and drop sales ones, and you have to find them and remember them for more effective planning next year. It is important to check whether the income matches the one you predicted or not: if not, you have to find out why it happened.

Second, you have to evaluate your actual expenses. See if they differ from your budget, how much do they affect it, why they exceed your expectations (if they do), and so on.

Probably the best thing about reviewing is that it allows you to react to all the unexpected situations quickly, saving your business from the potential troubles and downfalls. So be sure not to skip it.

As you see, writing a business plan is a complex process. You have to be very attentive, to plan everything, starting with your goals and ending with your expenses, to consider so many things and to involve other people in planning if possible. Moreover, you also have to learn all the time, reviewing your plans, making changes, finding the ways to react to unexpected situations.

But while this might look like a tough thing to do, it is very convenient for everyone who wants to manage their business successfully. The planning takes a lot off your shoulders and makes the whole business running process easier. You are able to evaluate the effectiveness of your business by looking at the monthly income increase, at the goals you wanted to achieve, and so on. You are also able to predict the potential downfalls of your business and to use the tools you have to minimize all the risks.

You are able to evaluate the effectiveness of your business by looking at the monthly income increase, at the goals you wanted to achieve, and so on. You are also able to predict the potential downfalls of your business and to use the tools you have to minimize all the risks.

I hope that this guide will help you create strong and realistic budget and business plans, and successfully implement them in running your business. If you have some tips on business and budget planning that you want to share, please do so in the comment section below!

Author’s Bio:

Kevin Nelson started his career as a research analyst and has changed his sphere of activity to writing services and content marketing. Apart from writing, he spends a lot of time reading psychology and management literature searching for the keystones of motivation ideas. Feel free to connect with him on Facebook , Twitter , Google+ , Linkedin .

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

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The Implementation Guide

2.13 how do we create an action plan and budget, the short answer.

1.  An action plan describes who will do what when and how. Action plans are developed after your strategy is developed. For each element of the strategy, identify tasks down the left column and across the top:  who is responsible (primary and secondary), begin and end dates, and a column for status reporting

2.  A budget describes what will be funded and how. Most budgeting processes involve four basic steps:

• Develop a list of what you want to do:  In Results-Based Accountability this means what works to turn the curves
• Prioritize the list:   This means using criteria, like specificity, leverage, values and reach.
• Attach a price tag to each item.
• Take the money you have and buy as far down the list as you can.

Full Answer

(1) If you can, read the full answer to Question  2.12  first.

(2) Let’s take action plan first. The basic notion of an action plan is who does what when and how. This is the most ancient part of planning. Even hunters from the distant past had action plans, although they were usually only a few pages, with bad spelling and  grammar. (Urg chase mammoth. Then Brk throw spear.)

So if you can agree on a strategy and set of actions and can space those actions out over several years, you have the ingredients for  an action plan. There are lots of different ways to structure an action plan. It can be as simple as a list of things to do, or as complicated as the Normandy invasion.

(3) Think of an action plan as a chart with tasks running down the left column. Across the top are the following columns: description of task; who is responsible (it is often a good idea to show primary and secondary responsibility or lead and support responsibility), when the task starts and when it should be finished. Most forms of this kind leave a column or two at the far right for status reporting.

The left most column (tasks)  usually shows the major strategic elements of the plan with the steps or tasks listed below each. These major elements and implementation tasks are sometimes called GOALS AND OBJECTIVES. (See the Language of Accountability ). Click here  to see an example of an action plan in this format.

(4) How to create a budget is a trick question. Because the creation of budgets are integrally part of the process of deciding what to do. There is a necessary back and forth process between what we want to do, how much it will cost and whether we have the money to do it. Here is the usual (and oversimplified) way this happens. (All budgeting can be boiled down to these four steps.) (1)  Develop a list of what you want to do , what works to turn the curves, using the thinking process described above (or some other method – throwing darts – popularity contest etc.) (2)  Prioritize the list.  This can be done in a number of different ways. One way  is to use selected criteria to judge each item. (3)  Attach a price tag to each item. (4)  Take the money you have and buy as far down the list as you can. Now the interesting part of budgeting comes in the different ways these steps can be done and the order in which they are done.

Step 1: The traditional way of answering step one is to skip all the steps in results-based budgeting up to the what works question. Ask everybody what they think works and what they want to do. This process has been used for a long time. But the problem is that everyone has a different idea of why they are doing it. In the absence of results and indicators, people will answer the what works question in any way they want (self interest, favorite program, dream they had last night) without regard to whether it might in fact turn the curves. We sometimes call this initiative based budgeting. “We’re going to have a children’s initiative this year. What should be in it? And you’re off and running. The results based thinking process described in this and other papers is a disciplined alternative to initiative based budgeting.

Step 2: There are any number of ways to prioritize a list. There are group process voting procedures that work well. One way to help guide this kind of process is to agree in advance on the criteria to be used to judge each possible item on the list. One set of criteria is offered above:  specificity  (Is the item actionable?);  leverage  (How much effect will it have on turning the curve?);  values  (Is it consistent with personal and community values); and  reach  (Is it feasible and affordable?)

Step 3: Figuring out how much something costs is not an easy thing to do. It is possible to use rough estimates to give people a sense of this in step 2. But sooner or later you must be serious about good estimates of cost. There are two parts to how much something costs: the total cost and your cost. These are not the same thing. If friends are pitching in to help you pay the rent this month, then the total cost is what you pay the landlord. And your cost is the total less your friends contributions. The image works for financing children and family services. You want as much money from your friends as possible. This means money from public and private sources. From public sources it means it means federal, state and local dollars. For federal funds it means money from capped funding sources (like the Social Services Block Grant or Drug Free Schools grants), and it means entitlement funding (where your money is matched by federal money (like Medicaid and federal foster care and adoption – Titles IVE and XIX of the Social Security Act). For more information about funding see question 2.14  How do we finance a results-based plan?  or go to the  FPSI website  and read “The Cosmology of Financing,”  See also “Financing Reform, Reforming Finance” at  resultsaccountability.com/papers you can read on line .

Step 4: The limiting part of this step is “the money you have.” Budgeting and finance is not just about the money you have but the money you could get. And it is about finding no-cost and low-cost means, not just costly ones. One way of going beyond this is to take each element of the plan and think about how that item could be funded. Use the money you have as a last resort, to match other money or serve as an incentive. Think of the ways in which your partners can help you both with cash and non-cash resource. The point is to think broadly and systematically about all the possibilities. (see question 2.14 )

What is Budgeting?

Translating strategy into targets and budgets, goals of the budgeting process, types of budgets, the process, additional resources.

The tactical implementation of a business plan

Budgeting is the tactical implementation of a business plan. To achieve the goals in a business’s strategic plan , we need a detailed descriptive roadmap of the business plan that sets measures and indicators of performance. We can then make changes along the way to ensure that we arrive at the desired goals.

There are four dimensions to consider when translating high-level strategy, such as mission, vision, and goals, into budgets.

• Objectives are basically your goals, e.g., increasing the amount each customer spends at your retail store.
• Then, you develop one or more strategies to achieve your goals. The company can increase customer spending by expanding product offerings, sourcing new suppliers, promotion , etc.
• You need to track and evaluate the effectiveness of the strategies, using relevant measures . For example, you can measure the average weekly spending per customer and average price changes as inputs.
• Finally, you should set targets that you would like to reach by the end of a certain period. The targets should be quantifiable and time-based , such as an increase in the volume of sales or an increase in the number of products sold by a certain time.

Budgeting is a critical process for any business in several ways.

1. Aids in the planning of actual operations

The process gets managers to consider how conditions may change and what steps they need to take, while also allowing managers to understand how to address problems when they arise.

2. Coordinates the activities of the organization

Budgeting encourages managers to build relationships with the other parts of the operation and understand how the various departments and teams interact with each other and how they all support the overall organization.

3. Communicating plans to various managers

Communicating plans to managers is an important social aspect of the process, which ensures that everyone gets a clear understanding of how they support the organization. It encourages communication of individual goals, plans, and initiatives, which all roll up together to support the growth of the business. It also ensures appropriate individuals are made accountable for implementing the budget.

4. Motivates managers to strive to achieve the budget goals

Budgeting gets managers to focus on participation in the budget process. It provides a challenge or target for individuals and managers by linking their compensation and performance relative to the budget.

5. Control activities

Managers can compare actual spending with the budget to control financial activities.

6. Evaluate the performance of managers

Budgeting provides a means of informing managers of how well they are performing in meeting targets they have set.

A robust budget framework is built around a master budget consisting of operating budgets, capital expenditure budgets, and cash budgets. The combined budgets generate a budgeted income statement, balance sheet, and cash flow statement.

1. Operating budget

Revenues and associated expenses in day-to-day operations are budgeted in detail and are divided into major categories such as revenues, salaries, benefits, and non-salary expenses.

2. Capital budget

Capital budgets are typically requests for purchases of large assets such as property, equipment, or IT systems that create major demands on an organization’s cash flow. The purposes of capital budgets are to allocate funds, control risks in decision-making, and set priorities.

3. Cash budget

Cash budgets tie the other two budgets together and take into account the timing of payments and the timing of receipt of cash from revenues. Cash budgets help management track and manage the company’s cash flow effectively by assessing whether additional capital is required, whether the company needs to raise money, or if there is excess capital.

The budgeting process for most large companies usually begins four to six months before the start of the financial year, while some may take an entire fiscal year to complete. Most organizations set budgets and undertake variance analysis on a monthly basis.

Starting from the initial planning stage, the company goes through a series of stages to finally implement the budget. Common processes include communication within executive management, establishing objectives and targets, developing a detailed budget, compilation and revision of budget model, budget committee review, and approval.

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Operating Budget

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How to Write and Develop an Action Plan for Your Small Business

6 min. read

Updated October 29, 2023

Taking action at the appropriate time is critical to turning your visions into a viable reality. However, doing so without a proper strategy can be a recipe for disaster. 

A well-designed and concrete action plan that weighs all the benefits and possible challenges is the key to executing your vision successfully. Furthermore, it makes tracking progress easier, which in turn helps you attain your goals. 

Whether it’s a business, personal, or career goal you are going after, the right action plan can be your roadmap to success. A comprehensive plan details all the information regarding your objectives and projects, such as the resources required, the complexity level of tasks, etc.

Let’s figure out how you can build one to achieve your goals successfully and efficiently.

• What is an action plan and why is it important?

An action plan serves as a trajectory for the tasks or steps you need to accomplish to reach your goals and objectives. It is a crucial part of your strategic process that helps you improve teamwork planning significantly. Also, a proper action plan allows you to manage projects efficiently.

You have all the essential information in a centralized location that your team can access, making it easier for everybody to monitor progress and plan things successfully. As your company grows and circumstances change, you can revisit and make modifications to meet your latest requirements.

Planning of action items helps you prepare for any obstacles ahead. You’re your teams on track while ensuring impactful results. Furthermore, it also boosts your productivity and keeps everybody focused on urgent tasks.  

Here are some of the reasons why an action plan is vital for you:

• It gives you a clear sense of direction by highlighting precisely the steps you need to take when you need to take that and what it will help you accomplish 
• Having your objectives and goals on paper with structured steps keeps the team members motivated and dedicated throughout the project
• You can gauge your and member’s progress and contribution toward the collective goals
• You can turn your visions into reality, increase accountability and efficiency within your organization

How to create an effective action plan 

When it comes to creating an action plan, various practical methods and tools can help you develop a robust action program. Begin by following this straightforward 7-step strategy.

Following these steps for structuring your action plan incidentally also acts as a brilliant roadmap for your idea’s overall presentation and can effectively create a clear goal.

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1. Define your scope

It is essential to define your scope, create a roadmap, and align it with your strategic planning . Make sure your actions guide you toward company goals. Start by gauging how your team members can contribute and help you achieve your objectives.

If you don’t have a clear understanding of what you want to achieve, it might be challenging for you to plan a new initiative. Defining your current status and where you see your company helps you analyze the situation, explore potential solutions and implement strategies successfully.

2. Set S.M.A.R.T. goals

S.M.A.R.T. (specific, measurable, achievable, realistic, and time-bound) objectives or goals is a method of objective setting that enables employees and managers to set, monitor, and achieve their long-term and short-term goals. This approach brings tractability and structure together.

Once you map out your plan, scope, and aim to accomplish, the next step requires you to set well-defined goals and measurable tools. Create a template to highlight all the tasks that your team needs to perform and deadlines.

It is vital to make sure that your entire team is on the same page, involved in the process, and has access to the document. This way, the projects become manageable while also boosting team productivity.

Furthermore, ensure that the tasks are attainable. If you have more complex tasks, it’s essential to break them down into manageable parts for easy execution. 

3. Visualize your plan

Once you plan on the action items, prioritize tasks, and set milestones, the next step is creating a visual representation of your action plan. This visualization helps you engage your team and allow everyone to follow through to carry out activities.

A graphical presentation also makes it easier to get a bird’s eye view of your project. This way, you can identify your objectives and tasks that you weren’t able to execute or reach, allowing you to prioritize them to accomplish them.

You can elaborate your action plan with the help of a concept map that can help you explicitly communicate all the essential elements and information — task owners, tasks owners, resources, goals, objectives, deadlines, etc. Also, make sure the document is easily accessible to all. 

Additionally, you can also leverage online visual collaboration platforms to help you seamlessly visualize and structure your simple and complex concepts.

4. Prioritize your tasks

It is imperative to align all your activities with specific goals and assign them to relevant team members. When you list and prioritize all your tasks, it helps keep track of your projects’ status, progress, and completion. 

You could also structure your task list by importance. This way, everyone knows what needs to be done first to meet your deadlines effectively while ensuring that your employees can manage those tasks. That way, your team will also know their responsibilities and tasks to get done and engage them with a clear vision.

5. Set milestones 

Milestones are the objectives that your team aims to achieve to keep a specific project progressing at a steady pace. Your work will have a lot smoother flow when everybody is clear with goals.

When you set milestones , it serves as mini-goals that help you achieve your central goal towards the end. Adding milestones to your action plan is crucial to give your team members something to look forward to and encourage them to stay motivated throughout.

6. Identify your resources

Before starting your project, it is imperative to ensure that you have the critical resources to complete the tasks successfully. And if you don’t have adequate resources, devise a strategy to leverage what you have effectively. Include all the essential components such as the number of projects, budget, timelines, etc., to make sure you don’t miss out on vital aspects.

Knowing what you have to work with will ensure that any tasks or projects you set out to accomplish have a better chance of succeeding. If you don’t have enough cash, a large enough team, or even enough time to manage every project, you’ll soon find yourself struggling to meet milestones and deadlines.

7. Monitor, gauge, and update

It is pivotal to allocate time and resources to evaluate your projects’ and teams’ progress. Make sure you conduct frequent follow-ups with team members to see if everybody is on track. 

For this reason, you need to elaborate on the follow-up and assessment of teams in your action plan. This will help you implement the strategies that work well and eradicate the ineffective ones.

• A guide to reaching your goals

An action plan is an indispensable tool that helps you guide your way to realizing your goals. It turns your visualization into actionable steps and milestones. 

From larger departments in an organization to individual employees, an action plan is a defined methodology that helps you outline your activities, tasks, resources, budget, objectives, etc. This, in turn, allows you to achieve desired outcomes.

JT Ripton is a business consultant and a freelance writer out of Tampa. JT has written for companies like T-Mobile and others.

Table of Contents

• How to create an effective action plan 

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How to Write an Action Plan: Step-by-Step (Examples)

By Status.net Editorial Team on November 9, 2023 — 9 minutes to read

An action plan is a detailed roadmap of the necessary steps you need to take to achieve a specific goal or objective. It’s like a GPS that guides you from your starting point to your desired destination. Creating an action plan helps you break down a large goal into smaller, more manageable tasks, which makes the goal feel less overwhelming.

To start, you should first identify your end goal and be as specific as possible. For example, if you want to increase sales for your business, set a target like “Increase sales by 20% within the next six months.” This will give you a clear vision of what you want to achieve and make it easier to measure your progress.

Next, list the necessary actions or tasks required to reach your goal. These can be further divided into smaller tasks that are easy to understand and implement. For example, to increase sales, you could:

• Improve your online presence by revamping your website, optimizing it for search engines, and posting regularly on social media platforms.
• Reach out to potential clients through email campaigns and cold calls.
• Offer promotions or discounts to incentivize new customers to try your product or service.

Now, it’s time to set a timeline for each task. Deadlines will enable you to monitor your progress and stay on track. Assign realistic due dates for each task, and if needed, break them down into smaller milestones.

To ensure your action plan’s success, make sure to assign responsibility for each task. If you’re working with a team, delegate tasks according to each team member’s strengths, skills, and workload. This will help ensure everyone knows what their responsibilities are, and they are held accountable.

Lastly, always monitor your progress and evaluate your action plan’s effectiveness. Regularly review the tasks you’ve accomplished, and make note of the tasks that were challenging or required more time than anticipated. This self-assessment will help you improve your action plan and make necessary adjustments as you work towards your goal.

Example Action Plan

Goal : Increase sales by 20% within the next 6 months (By January 1st, 2025)

Actions : 1. Improve online presence a) Revamp website design – Due October 15th b) Optimize website for SEO – Due November 1st c) Post regularly on social media (1x/week min) – Ongoing

2. Reach out to potential clients a) Create email marketing campaign – Due September 15th b) Start cold calling campaign (10 calls/day) – Start October 1st

3. Offer promotions a) Design promotion flyers – Due September 1st b) Run month-long 20% off sale – October 1-31st

Monitoring : – Check website analytics weekly – Track new clients monthly – Evaluate sales figures monthly – Adjust plan as needed at monthly meetings

Responsibilities : – John to revamp website – Susan to handle social media – Michael to create promotions – Jennifer to manage outreach campaigns

Steps to Creating a Powerhouse Action Plan

First, identify your goal . Be specific about what you want to achieve and set a time frame for accomplishing it. This will help keep your efforts focused and prevent you from getting overwhelmed by smaller tasks. For example, instead of “increase sales”, choose “increase sales by 20% in the next six months”.

Next, break your goal down into smaller, manageable tasks . Create a list of activities or steps that must be completed in order to reach your goal. If your goal is to Increase sales by 20%, some tasks might be:

• Research your target market
• Develop a marketing strategy
• Improve product offerings
• Train your sales team

Assign a deadline and responsible party for each task on your list. This will help ensure that all tasks are completed on time and that everyone knows their role in achieving the goal. Make sure to set realistic timelines for each task, taking into consideration the resources and time available.

Here’s an example:

• Research your target market – due in one week – assigned to Jane (marketing specialist)
• Develop a marketing strategy – due in two weeks – assigned to marketing team

Monitor your progress regularly. Keep track of your progress by using tools such as calendars, project management software, or a simple spreadsheet. Regularly assess whether you’re on track to meet your goal and adjust your action plan if needed. For example, if a task is taking longer than expected, you may need to reassign resources or revise the deadline.

Celebrate your milestones and learn from setbacks . Along the way, take the time to acknowledge and celebrate your successes, as well as learn from any setbacks or challenges. This will help maintain motivation and encourage continuous improvement.

Finally, communicate your action plan to all stakeholders involved, such as employees, investors, or clients. Clear communication ensures everyone understands the goal, their responsibilities, and the expectations for the project.

Defining Clear and Smart Goals

Specific goals.

When creating your action plan, start by setting specific goals. These are clear, well-defined goals that leave no room for ambiguity. You should know exactly what needs to be accomplished and how you plan to achieve it. For example, instead of aiming for “increasing sales,” set a goal like “increase sales by 15% over the next six months.”

Measurable Goals

Your goals should be measurable so that you can track your progress and know when you’ve achieved them. This involves identifying quantifiable indicators that will help you determine your progress. For instance, if your goal is to increase sales, a measurable component can be the number of units sold or the amount of revenue generated within a specific timeframe.

Achievable Goals

When setting goals, make sure they are achievable and realistic based on your current resources and constraints. Consider your team’s capabilities, time, and budget. Unattainable goals may negatively impact your motivation and morale. For example, if you have a small team with limited resources, setting a goal to double your company’s size within a month might be unrealistic. Instead, aim for a modest yet challenging growth rate that can be achieved with your available resources.

Relevant Goals

Your action plan goals should also be relevant to your organization’s mission and vision. These are goals that align with your overall strategic plan and contribute to its long-term success. Relevant goals ensure that your efforts are focused on high-impact areas and avoid unnecessary distractions. For example, if your business is focused on sustainability, a relevant goal might be to reduce your company’s carbon footprint by 20% in the next year.

Time-bound Goals

Finally, ensure that your goals are time-bound, meaning they have a deadline for completion. Deadlines keep your team accountable and help maintain a sense of urgency, which is crucial for staying on track and achieving your objectives. A clear timeframe also allows you to measure your progress and adjust your plans as needed. For instance, you could set a goal to expand your customer base by 10% within the next quarter.

Assigning Roles and Responsibilities

When creating an action plan, it’s important to assign roles and responsibilities to your team members. This helps ensure tasks are completed efficiently and everyone is clear about their duties. Here’s how to do it effectively:

• First, identify the necessary tasks to achieve your goal. Be specific about what needs to be done and break it down into smaller steps if needed. For example, if your action plan involves promoting a new product, tasks could include designing promotional materials, creating social media posts, and reaching out to potential partners.
• Next, evaluate the skills and expertise of your team members. Consider their strengths, weaknesses, and past experiences with similar projects. This will help you match team members with tasks that best suit their abilities. For instance, someone with graphic design expertise should be responsible for creating promotional materials.
• Once you’ve determined which team members are best suited for each task, clearly communicate their roles and responsibilities. This can be done through a project management tool, an email, or a team meeting. Make sure everyone is aware of their duties and the deadlines for each task.
• Keep track of everyone’s progress, and hold regular check-ins to see how each team member is doing with their assigned tasks.
• Be open to adjusting your action plan and roles as necessary. Sometimes, unforeseen challenges can arise and require you to modify your plan.

Creating a Time Frame

When working on your action plan, it’s important to establish a realistic time frame for achieving your goals. This helps you stay on track and prioritize tasks effectively. We will walk you through the process of creating a time frame for your action plan.

• First, break down your primary goal into smaller, manageable tasks. Think of these tasks as stepping stones that will lead you toward your overall objective. For example, if your goal is to start a new business, your tasks might include researching your target market, establishing a budget, and developing a marketing strategy.
• Next, assign a deadline to each task. Deadlines should be specific and set in stone but make sure to be flexible enough to adjust as necessary. Use a calendar or planner to visualize your timeline, marking important dates and milestones. For example, you could set a four-month deadline for completing market research and a six-month deadline for securing initial funding.
• To keep yourself accountable, set reminders or notifications for important deadlines. This can be done using digital tools like smartphone apps or traditional methods, such as sticky notes on your workspace. Regularly reviewing your progress and adjusting your time frame when needed will help you stay on track.
• Lastly, consider any external factors that might impact your time frame. Are there seasonal events, holidays, or industry-specific deadlines that could affect your ability to complete tasks? Factor in these considerations as you build your timeline.

Resource Allocation

When creating an action plan, resource allocation plays a major role. You’ll need to determine the resources required for each task and how they’ll be distributed among team members. This usually includes time, budget, and human resources.

• Start by estimating the time each task will take. Break tasks down into smaller chunks and allocate a specific deadline to each. This will help you prioritize tasks and balance workloads for your team members. For example, if designing a marketing campaign takes four weeks, divide it into weekly tasks like conducting market research, creating promotional materials, and setting up advertisements.
• Next, determine the budget needed to complete your project. Identify any expenses such as salaries, equipment, software, and project-related costs like travel. Create a budget for each task to avoid overspending, and allocate funds accordingly. Using our marketing campaign example, allocate separate budgets for market research tools, graphic design tools, and advertising platforms.
• Lastly, allocate human resources to tasks based on their skills and expertise. Delegate responsibilities to your team members, ensuring that everyone has a clear understanding of their role in the project. If needed, identify additional hires or outside consultants to fill gaps in your team’s expertise. For instance, if your team lacks graphic design experience, consider hiring a graphic designer or outsourcing the work to a design agency.
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What Is the Difference Between a Strategic Plan & a Budget?

• Small Business
• Business Planning & Strategy

Strategic Planning

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A business needs to have both a strategic plan and a budget. The strategic plan lays out the direction and goals of the business and guidelines for actions to achieve those goals, while the budget looks at the money needed to support achieving those goals. Budgeting is only one part of the strategic planning process.

Many approaches to strategic planning are available. One approach is to start with a strategic analysis of where the organization is now, including its strengths and weaknesses and the economic, social, political and technical environment in which the business operates. The next step is to decide what direction the business wants to head; this process may involve developing a mission statement or strategic philosophy and setting goals. The next step is to identify tactics or action steps for achieving strategic goals.

Strategic Planning Models

Carter McNamara, Ph.D., of Authenticity Consulting, LLC, identifies six strategic planning models. Vision-based or goals-based strategic planning focuses on goals the organization wants to achieve. Issues-based planning focuses on resolving issues the organization faces. The alignment model aims to ensure the organization’s mission and its resources are effectively aligned in the organization's operation. Scenario planning focuses on looking at possible situations the organization may face. Self-organizing planning focuses more on the organization's culture and learning and less on method. Real-time planning is more of a continuous planning process than a one-time or periodic planning process.

A budget is a forecast of all income and expenses, and helps a business identify future financial needs and plan based on expected profit, expenses and cash flow. If a business doesn't have the budget to support its strategic plan, the business needs to either modify its plan or find the financial means to support the plan.

Budgeting Process

Budgets cover a certain period of time. Most businesses develop monthly, quarterly and annual budgets. The "Entrepreneur Small Business Encyclopedia" recommends developing budgets that cover at least the next three years, and preferably five years. Budgets can be periodically updated based on current information; however, "Entrepreneur" warns businesses against getting so caught up in the budget process that they forget to keep doing business.

• Free Management Library; Basic Description of Strategic Planning; Carter McNamara
• Free Management Library; Basic Overview of Various Strategic Planning Models; Carter McNamara
• Strategic-Control.com; Strategic Planning; Ryszard Barnat
• "Entrepreneur"; Small Business Encyclopedia: Income Statement

Carol Wiley started writing as a technical writer/editor in 1990, was a licensed massage therapist for almost 12 years and has been writing Web content since 2003. She has a Bachelor of Science in aerospace engineering, a Master of Business Administration, a Certificate in Technical Writing and Editing and a Certificate in Massage Therapy.

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Strategic Budgeting: What Is It, Process, and Best Practices

• Written by Lyle Del Vecchio
• 17 min read

KEY TAKEAWAYS

• Strategic budgeting combines long-term budgeting with an organization’s strategic priorities.
• For the greatest chance of success, senior leadership should be involved in setting goals and determining success metrics that are aligned to budgets.
• Being agile enough to make adjustments as circumstances change is key.

Budgeting is a critical financial planning and management aspect for individuals, businesses, and organizations.

Among the various types of budgeting, strategic budgeting stands out as a powerful tool for achieving long-term financial goals.

This comprehensive guide will delve into strategic budgeting, its importance, the steps involved in creating a strategic budget, benefits, challenges, best practices, and help identify differences between forecasting and budgeting.

What is Strategic Budgeting?

Strategic budgeting is a process that combines budgeting with strategic planning, aligning an organization’s financial resources with its long-term objectives.

It focuses on allocating resources effectively, prioritizing investments, and ensuring financial stability while pursuing growth and innovation.

Different Types of Budgeting Methods

There are various different types of budgets and budgeting models in accounting .

Incremental Budgeting

Incremental budgeting is a traditional approach to budget planning that involves taking the previous year’s annual budget and adjusting it based on factors such as inflation, cash flow, or other changes in the organization’s financial landscape.

This method is simple to implement and maintain, relying on historical data and relatively minor adjustments.

However, incremental budgeting may not account for changing priorities, short-term expenditures, or new opportunities, limiting its effectiveness in some situations.

Zero-Based Budgeting

Zero-based budgeting is a more rigorous approach that requires every expense to be justified each budgeting period, starting from zero.

This method encourages efficiency and reduces unnecessary spending by forcing organizations to evaluate each expenditure and its contribution to its goals carefully.

While zero-based budgeting can lead to more effective resource allocation, it can be time-consuming and challenging to implement, as it requires a comprehensive review of all expenses during each budgeting cycle.

Activity-Based Budgeting

Activity-based budgeting focuses on the cost of activities and processes required to achieve specific objectives.

By examining the relationship between costs and outcomes, activity-based budgeting helps organizations identify inefficiencies, allocate resources more effectively, and improve overall financial performance.

This type of budgeting can be complex and require significant data analysis, making it more suitable for organizations with well-defined processes and the ability to gather detailed cost information.

Strategic Budgeting

Strategic budgeting, as previously mentioned, is a method that combines strategy and budget planning, emphasizing long-term objectives and resource allocation.

This approach ensures that an organization’s financial resources are aligned with its overarching goals, promoting growth, innovation, and financial stability.

By focusing on long-term priorities and investments, strategic budgeting helps organizations make informed decisions about resource allocation and adapt to changing market conditions.

Why are Budgeting Strategies Important?

Budgeting strategies like strategic budgeting help organizations make informed decisions about resource allocation, prioritize investments, and ensure financial stability.

They provide a roadmap for achieving long-term goals, promoting growth and innovation while managing risks and uncertainties.

The Strategic Budgeting Process

Creating a strategic budget involves the following steps:

Set Long-Term Goals and Objectives

Begin the strategic budgeting process by defining your organization’s long-term goals.

These goals can include market expansion, new product development, revenue growth, or other objectives that drive your organization’s success. Setting clear and measurable goals will provide the foundation for the rest of the budgeting process .

Identify Key Initiatives

With your long-term objectives, determine the strategic initiatives required to achieve these goals.

Such initiatives may include marketing campaigns, research and development projects, or hiring new talent. Identifying key initiatives helps ensure that your budget is focused on activities that contribute directly to your organization’s long-term success.

Develop Financial Projections

Next, develop financial projections for each identified initiative. Estimate the costs associated with each initiative and project revenues based on market trends, historical data, and growth expectations.

Accurate financial projections are essential for allocating resources effectively and setting realistic expectations for the outcome of each initiative.

Allocate Resources

With financial projections in hand, allocate financial resources to each initiative. Prioritize initiatives with the highest potential impact on your long-term objectives, ensuring that your budget is aligned with your organization’s goals.

Resource allocation is a critical step in the strategic budgeting process, as it determines where your organization will invest its time, effort, and money.

Monitor Progress

Finally, regularly review your strategic budget versus actual expenditure and monitor progress towards your long-term objectives. Compare actual results with your projections and adjust as needed to stay on track.

Monitoring progress is crucial for maintaining accountability, identifying areas for improvement, and ensuring that your strategic budget remains aligned with your organization’s goals. You can make data-driven decisions that drive your organization forward by consistently evaluating your budget’s performance.

Benefits of Strategic Budgeting

Aligning resources with long-term strategic goals.

Strategic budgeting allows organizations to focus on their most important initiatives, ensuring that resources are allocated effectively and efficiently.

By aligning financial resources with long-term goals, organizations can prioritize investments that contribute directly to their success, making the most of their available resources.

Encouraging Innovation and Growth

One of the key benefits of strategic budgeting is its ability to promote investment in new opportunities and support long-term growth.

Organizations can continually evolve, adapt, and stay competitive in their respective industries by identifying and prioritizing initiatives that drive innovation and expansion. An agile business can be ready to seize opportunities .

Improving Decision-Making

Strategic budgeting provides a clear roadmap for achieving an organization’s objectives, which helps improve decision-making at all levels.

With a well-defined budget, organizations can make informed decisions about investments and resource allocation, ensuring that every financial decision supports their long-term goals and overall strategic vision.

Enhancing Financial Stability

Strategic budgeting contributes to an organization’s financial health and stability by prioritizing investments and managing business risks .

Organizations can identify areas where resources may be better allocated, reduce unnecessary spending through strong budgetary control and spend control , and ensure they are prepared to weather any financial challenges that may arise.

This proactive approach to financial management helps organizations maintain a strong financial position and achieve their long-term objectives.

Challenges of Strategic Budgeting

Ensuring accurate projections.

One of the main challenges of strategic budgeting is developing accurate financial projections, which can be difficult in uncertain or rapidly changing markets.

Organizations must carefully analyze historical data, market trends, and other relevant factors to create realistic budget forecasting projections that accurately reflect their long-term goals and objectives.

When planning your projections you should also ensure you are budgeting for variable expenses , if not planned for these can easily blow your budget.

Inaccurate projections can lead to poor decision-making and resource allocation, ultimately undermining the effectiveness of the strategic budget.

Fostering Collaboration

Creating a strategic budget requires input and cooperation from various organizational departments and stakeholders. This involves other departments collaborating effectively with finance .

This collaboration can be challenging, as different departments may have competing priorities, differing opinions on resource allocation, or varying levels of understanding about the organization’s overall strategy.

To overcome this challenge, organizations must foster a culture of open communication, shared goals, and commitment to the strategic budgeting process.

Maintaining Ongoing Monitoring

Effective strategic budgeting demands regular reviews and adjustments, which require time and effort from all involved parties.

Organizations must continually monitor their progress, compare actual results with projections, and make necessary adjustments to stay on track.

Having real-time spend visibility , carrying out budget variance analysis , reviewing spend analysis on procurement activities , and following budget reporting best practices by using a dedicated spend management software that incorporates business budgeting software , like Planergy, can help.

This ongoing monitoring can be time-consuming, especially if managed manually, but it is crucial for ensuring that the strategic budget remains aligned with the organization’s long-term goals and objectives.

Implementing tools and processes to streamline budget monitoring and reporting can help mitigate this challenge and promote a more efficient approach to strategic budgeting.

Regardless of business size, the right budgeting strategy can be the difference between success and failure.

Best Practices for Strategic Budgeting

Involving the leadership team and all stakeholders.

One of the most important best practices for strategic budgeting is to engage key stakeholders in the business budget planning process . This ensures buy-in and commitment from all parties involved, fostering collaboration and effective decision-making.

Encourage open communication, solicit input and feedback, and ensure that all stakeholders understand the organization’s long-term goals and the role of the strategic budget in achieving those objectives.

Leveraging Historical Data and Market Research

Leveraging historical data and market research to create accurate financial projections and assumptions is crucial.

Analyze past performance, market trends, and industry insights to make informed decisions about resource allocation and expected outcomes.

You can increase your strategic budget’s accuracy and effectiveness by grounding your strategic budget in data-driven insights.

Using the Right Tools

It’s important to use the right budgeting tools, as they play a crucial role in ensuring the accuracy and efficacy of the budgeting process.

Effective tools streamline data management, facilitate stakeholder collaboration, and allow organizations to monitor their financial performance easily.

While Excel might be an excellent option initially for smaller companies, its limitations become apparent in larger and more complex organizations.

As organizations grow, they require more advanced budgeting solutions and controls to handle increased data volume, automate repetitive tasks, and provide real-time insights into financial performance.

By investing in the right budgeting tools, organizations can significantly improve the efficiency and effectiveness of their budgeting process, ultimately leading to better decision-making, resource allocation, and financial success.

Being Realistic and Conservative

When developing financial projections and assumptions, it’s essential to be realistic and conservative.

Avoid overly optimistic projections that may be difficult to achieve, and instead, focus on attainable goals that align with your organization’s goals for the coming year and long-term objectives.

Additionally, build contingencies into your budget to account for unforeseen events or challenges, ensuring your organization is prepared to adapt and respond to changing circumstances.

Implementing a Rolling Budget

Instead of relying on a traditional annual budget, consider implementing a rolling budget combined with rolling forecasts that is continually updated and extended as new information becomes available.

A rolling budget allows organizations to respond more quickly to changes in the market or their financial situation, promoting agility and adaptability.

Regularly updating and revising your strategic budget ensures it remains aligned with your organization’s evolving goals and priorities.

Budgeting vs. Forecasting: Key Differences

Budgeting: creating a financial plan.

Budgeting is the process of creating a detailed financial plan for a specific period, usually a fiscal year, and allocating resources to achieve specific organizational goals.

The budget serves as a roadmap for financial decision-making, guiding how funds should be spent and outlining expected income and expenditures.

Budgets are typically fixed, meaning they remain relatively unchanged throughout the budget period, and are used to assess performance by comparing actual results against the planned figures.

Key aspects of budgeting include:

• Setting financial goals and objectives
• Allocating resources to meet those objectives
• Establishing spending limits and guidelines
• Monitoring progress and comparing actual results against the budget

Forecasting: Estimating Future Financial Outcomes

In contrast, forecasting involves estimating future financial outcomes based on historical data, market trends, and various assumptions. Spend forecasting helps inform budget planning.

Forecasts are more flexible than budgets, as they are continually updated and revised as new information becomes available or circumstances change.

Forecasting helps organizations anticipate future performance, identify potential risks and opportunities, and make proactive decisions to maximize success.

Key aspects of forecasting include:

• Analyzing historical data and trends
• Identifying potential risks and opportunities
• Estimating future revenues and expenses
• Adjusting forecasts as new information becomes available

Embrace Strategic Budgeting for Long-Term Success

Strategic budgeting is a powerful tool for aligning an organization’s financial resources with its long-term objectives.

By following the steps outlined in this guide and implementing best practices, businesses and organizations can effectively create and manage their operating budgets, achieving growth, innovation, and financial stability.

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• Create an action plan that drives resul ...

Create an action plan that drives results

An action plan outlines precisely how you’re planning to accomplish your goals. It’s the perfect way to approach goals systematically and keep your team on target. In this article, we will cover how to create an action plan in six steps and how to implement it successfully. Plus, learn more about the differences between action plans, project plans, and to-do lists.

It can feel good to make goals. After all, you’re defining what you want to accomplish. But goals won’t do much without clear action steps. ​​An action plan is a popular project management technique that lists your action steps so you know exactly how you’re going to accomplish your goals. 

We’re going to show you how to create this clear roadmap step by step and other tools you should utilize to get the most out of your action plan. Let’s dive in.

What is an action plan?

An action plan is a list of tasks or steps you need to complete to achieve your goals. An effective action plan works like a management plan for your company’s initiatives, outlining the steps you need to take to make these larger goals a success. Once you go through the goal-setting process, create an action plan with specific tasks and timeframes to reach each goal. 

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Who needs an action plan?

An action plan is useful for anyone who needs a step-by-step planning process. When you create an action plan, you detail exactly what actions you'll take to accomplish your project goals. These plans can help you organize your to-dos and ensure you have the necessary information and resources to accomplish your goals.

But you can create action plans for more than just strategic planning. Use this tool to reach any specific goals in a systematic way. Try setting up:

Business action plan

Marketing action plan

Corrective action plan

Sales action plan

Project action plan

Personal development action plan

Regardless of the type of action plan you create, make sure you create it in task management software . That way, you can easily share action items and timelines with your team to track progress. Instead of manual status updates and unclear deliverables, your team has one central source of truth for everything they need to do in order to hit their goals. 

Now let’s get into how you can create an action plan that increases your team’s efficiency and accountability.

6 steps to create an action plan

Step 1: set a smart goal.

When it comes to setting goals, clarity is the single most important quality. With the SMART goal method, your goal is clearly defined and attainable. Set specific, measurable, achievable, realistic, and time-bound goals to benefit from this tactic.

For example, your goal could be to deliver your current project (measurable) in four months (time-bound) without overspending (specific). Assuming this goal is both achievable and realistic based on your available resources, it’s a great SMART goal to set for yourself.

Step 2: Identify tasks

Now that your goal is clearly defined and written down, you’ll want to identify the steps you have to take to reach it. Identify all of the tasks that you and your team need to complete to reach milestones and, eventually, the main objective.

Here are a few action plan examples with tasks for different kinds of goals:

Goal: Expand team from seven to nine team members by June.

Meet with Human Resources to discuss the recruitment campaign.

Create a template project to track candidates.

Schedule three interviews per week.

Goal: Select and onboard new work management software to the entire company by the end of Q2.

Apply for the budget.

Create a roll-out plan for Q2.

Schedule training for team members.

Goal: Host 5k charity run in May to raise $15,000 for the local food bank.

Find volunteers and determine responsibilities

Prepare marketing materials and PR plans

Secure sponsors

Step 3: Allocate resources

Once you’ve outlined all of your tasks, you can allocate resources like team members, project budget, or necessary equipment. Whether it’s assigning team members to certain tasks, applying for a budget, or gathering helpful tools—now is the time to plan and prepare.

Sometimes, you can’t allocate all of your resources before you put your action plan in motion. Perhaps you have to apply for funding first or need executive approval before you can move on with a task. In that case, make the resource an action item in your plan so you can take care of it later.

Step 4: Prioritize tasks

When your team is clear on their priorities, they know what work to do first and what work they can reschedule if necessary. No action plan is set in stone, so the best way to empower your team is to let them know what tasks have a high priority and which ones are a bit more flexible.

To make this clear, sort all of your action items by priority and sequence:

Priority: Important and less important tasks.

Sequence: Order in which tasks have to be completed so others can start.

When you’re organizing and prioritizing your action items , you’ll notice that some action items are dependent on others. In other words, one task can’t begin until the previous task is completed. Highlight these dependencies and factor the sequence into your prioritization. This reduces bottlenecks , removing obstacles that would make a less important action item delay a high-priority item.  

Step 5: Set deadlines and milestones

When your team knows what they're working towards, they have the context to effectively prioritize work and the motivation to get great work done. Team members tend to be more motivated when they directly understand how their work is contributing to larger goals.

To engage your teammates from the get go, assign deadlines to all action items and define milestones . Milestones mark specific points along your project timeline that identify when activities have been completed or when a new phase starts

Create a timeline or Gantt chart to get a better overview of your prioritized tasks, milestones, and deadlines. Your timeline also serves as a visual way to track the start and end dates of every task in your action plan. You can use it as a baseline to make sure your team stays on track.

Step 6: Monitor and revise your action plan

Your ability to stay on top of and adapt to changes is what makes you a great project manager. It’s crucial that you monitor your team’s progress and revise the plan when necessary.

Luckily, your action plan isn’t set in stone. The best way to track potentially changing priorities or deadlines is to use a dynamic tool like a work management software . That way, you can update to-dos and dependencies in real time, keep your team on the same page, and your action plan moving.

Action plan vs. plan B vs. project plan vs. to-do list

So how exactly does an action plan differ from all these other plans and lists? To clear this up once and for all, we’re going to explain what these plans are and when to use which plan to maximize your team’s efforts.

Action plan vs. plan B

You may have heard the terms action plan and plan B used interchangeably. But in fact, an action plan and plan B are two completely different types of plans. Here’s how to tell them apart:

Your action plan outlines actions in much detail so you and your team know exactly what steps to take to reach your goal.

A plan B is a secondary action plan, an alternative strategy, that your team can apply if your original plan fails. Whether that’s because of an internal issue or an external factor—having a plan B is a great way to be prepared for the worst case scenario.

Action plan vs. project plan

A project plan is a bit more complicated than an action plan. Project plans are blueprints of the key elements your team needs to accomplish to successfully achieve your project goals. A project plan includes seven elements:

Goals and project objectives

Success metrics

Stakeholders and roles

Scope and budget

Milestones and deliverables

Timeline and schedule

Communication plan

Once you’ve created a project plan, use an action plan to outline and document how your team will execute your tasks and hit your goals. This will ensure that everyone on your team knows what their responsibilities are and what to get done by when.

Action plan vs. to-do list

A to-do list is typically used to write down single tasks that don’t necessarily lead to one common goal. To-do lists can change daily and are much less organized than action plans. An action plan will follow specific steps and include tasks that all lead to the completion of a common goal.

How to implement your action plan successfully

You know how to create an action plan, but in order to implement it successfully, you need to use the right tools and use them correctly. Here are our top five tips to ensure your action plan is effective:

Use task management software

Streamline your action plan by keeping all of your tasks and timelines in one central source of truth. Task management software, like Asana , is perfect for your action plan because it allows you to keep track of pending tasks, declare task ownership, assign dependencies, and connect with your team in real time or asynchronously .

Use or create templates

Create or use a template that lists all the action items with notes, status, priority, and ownership. When you create a template that fits your project type, you can reuse it time and time again.

Set up real-time alerts and assign dependencies

Make sure all action items are time-bound and that you assign dependencies. That way, your team can react when an item is ready for them and easily track what other items depend on theirs. 

Check action items off as you complete them

When action items are completed, check them off! Make sure it’s visible to everyone and happens in real time so the person responsible for the next action item can start their work as soon as possible.

Discuss late or pending tasks

If you run into issues or delays, talk to your team to uncover potential bottlenecks and find solutions that keep the action plan on track. You can add notes directly into your action plan or set up calls to discuss more complex issues.

Ready, set, action plan

Like Benjamin Franklin once said: “If you fail to plan, you are planning to fail.” Creating an action plan helps you stay focused, on track, and brings your goals to life.

Plan to succeed with a structured action plan and helpful tools like Asana’s task management software. Connect and align with your team in a central source of truth while staying flexible enough to revise your action plan when necessary.

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12 Key Elements of a Business Plan (Top Components Explained)

Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .

You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.

Let’s get started.

Why Are Business Plans Important?

Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .

During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.

3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.

A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).

You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.

Key Elements of Business Plan

Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.

A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.

An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

• The name and location of your company
• Products and services offered by your company
• Mission and vision statements
• Success factors of your business plan

2. Business Description

Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.

A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.

Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

• Business location
• The legal structure of your business
• Summary of your business’s short and long-term goals

3. Market Analysis

The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.

Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.

Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.

Market Analysis Factors

Here are some of the factors to be included in your market analysis.

• The geographical location of your target market
• Needs of your target market and how your products and services can meet those needs
• Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

• Industry description and statistics
• Demographics and profile of target customers
• Marketing data for your products and services
• Detailed evaluation of your competitors

4. Marketing Plan

A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.

The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.

5. Sales Strategy

Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.

Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.

6. Competitive Analysis

Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.

The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

• Your competitors' identified advantages in the market
• How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
• The standout qualities that distinguish you from other companies
• Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.

7. Management and Organization

Management and organization are key components of a business plan. They define its structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.

Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.

Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.

This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.

8. Products and Services

This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.

9. Operating Plan

An operations plan describes how you plan to carry out your business operations and processes.

The operating plan for your business should include:

• Information about how your company plans to carry out its operations.
• The base location from which your company intends to operate.
• The number of employees to be utilized and other information about your company's operations.
• Key business processes.

This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.

10. Financial Projections and Assumptions

Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.

The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.

Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.

Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:

• Projected income statements
• Cash flow statements
• Balance sheets
• Income statements

Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.

11. Request For Funding

The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.

When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.

12. Exhibits and Appendices

Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:

• Legal documents
• Licenses and permits
• Credit histories
• Customer lists

The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.

Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

• The management team and other stakeholders resume
• Marketing research
• Permits and relevant legal documents
• Financial documents

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Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

Project Management

The Beginners Guide to Creating An Action Plan

Max 9 min read

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Imagine being a conductor of a world-class orchestra with no musical score, each member of the ensemble playing their own tune.

Harmony is disrupted; chaos takes center stage. Similarly, the lack of an action plan in any business can lead to inefficiency, confusion, and missed opportunities.

An action plan serves as that indispensable compass, the essential score. It offers clear direction, keeps everyone aligned, and orchestrates a harmonious path toward business goals.

With an action plan, you turn the chaos of the unknown into a well-synchronized dance of progress and productivity.

In this article, we delve deep into the world of action plans. We’ll explore their building blocks and learn why they are more than just a set of tasks or to-dos.

Through a step-by-step guide, you will understand how to create an action plan that is tailored to your business’s unique needs, along with ways to efficiently implement and monitor it.

And to give you a head start, we’ll even dissect some action plan samples, pulling out the essential ingredients that you can use in your recipe for success.

Ready to dive in? Let’s embark on this journey toward crafting and executing an effective action plan.

The DNA of an Action Plan

Every flourishing venture, big or small, has a secret formula behind it – a detailed action plan. But what exactly is an action plan? It’s a roadmap for success, a sequence of action steps for goals meticulously designed to drive your business toward its objectives.

An action plan is a detailed layout that outlines a set of specific actions needed to reach your goals. It serves as a reliable GPS, directing your business operations with clarity and focus. But this GPS is more than just your route; it’s your pit stops, rest areas, and destination.

Breaking down the structure, the components of an action plan include:

• Clear Goals: Every action plan starts with defining what you aim to achieve. Goals are your end-point, your desired outcome. They are the ‘why’ of your action plan, giving purpose and direction to your journey.
• Action Steps: These are the ‘what’ of your plan, the specific tasks or activities you need to perform to reach your goals. Each action step is a critical milestone on your road to success.
• Responsibilities: Accountability is key in any action plan. By designating who is responsible for each action step, everyone on your team knows exactly what their role is, fostering a sense of ownership and commitment.
• Resources: Be it monetary funds, time, equipment, or human resources, clearly identifying what you need to carry out each action step will help ensure smooth execution.
• Timeframes: A sense of urgency and a clear timeline are vital for maintaining momentum. By setting deadlines for each action step, you can monitor progress effectively and keep your journey on track.
• Measurable Outcomes: What does success look like for each action step? Having clear metrics in place allows you to evaluate performance objectively.
• Follow-up Mechanisms: Lastly, defining how you’ll track, review, and adjust progress ensures your action plan remains flexible and responsive to changing business dynamics.

Writing an action plan involves creating this blueprint, a precise path that clearly defines ‘how to write a plan of action.’ This process, though meticulous, is a strategic investment. It translates your grand visions into manageable, bite-sized tasks, making the climb towards your goal a series of achievable steps.

The beauty of an action plan lies in its adaptability. It’s not a rigid map but a dynamic guide that adjusts to your evolving business journey. Its purpose is to offer a clear direction while accommodating detours, helping you navigate the complex business terrain with confidence and control.

Why Do We Need Action Plans?

The necessity and potency of action plans lie in their innate ability to turn nebulous goals into concrete action steps. Their purpose is to make the daunting achievable, bringing your aspirations from the realm of ideas into the world of action.

Here’s why an action plan is a compelling necessity in different scenarios:

Launching a New Product

Imagine launching a new product, a complex and multifaceted endeavor that can feel akin to exploring uncharted territories.

However, an action plan serves as your torchlight, illuminating the path.

By setting clear steps, resources, responsibilities, timelines, and success metrics, an action plan transforms the product launch maze into a well-lit pathway, guiding you from concept to market.

Enhancing Customer Service

Consider a company striving to elevate its customer service quality. Without a clear plan, improvement efforts can be disjointed and ineffective.

However, with an action plan, the company can outline systematic and strategic action steps. These steps might include employee training, updating service protocols, or integrating new tech tools.

Each step is targeted and measured, ensuring a cohesive, organized approach towards enhancing customer satisfaction.

Personal and Community Projects

The purpose of action plans transcends the confines of corporate walls. They are equally powerful in personal and community contexts.

Are you aiming to run a marathon, planning a community fundraiser, or working on a university project?

An action plan is your route to success, breaking down grand ambitions into manageable steps. It’s the difference between a lofty dream and a reachable goal.

So, the purpose of an action plan?

It’s about transforming your ‘why’ into ‘how.’ It’s about taking the journey from intention to action, from aspiration to achievement. It’s your strategic companion on the road to success, ensuring each step you take is purposeful and progress-driven.

How to Write an Action Plan

Writing an action plan is like crafting a detailed itinerary for your journey to success. But how do we plot this itinerary?

Here’s a step-by-step guide to help you ‘write an action plan’ with precision, turning your lofty goals into actionable steps.

Step 1: Identify Clear Goals

The first step in ‘writing an action plan’ is to define clear, concise goals. What is it that you aim to achieve? Be specific and use measurable terms wherever possible. Remember, the goal is your destination; hence, it should be well-defined to provide a clear sense of direction.

Bonus Tip: Use the SMART framework for goal setting – Specific, Measurable, Achievable, Relevant, and Time-bound.

Step 2: Create a List of Action Steps

Now, break down your goal into ‘action steps for goals’. These are the tasks you need to perform to achieve your goal. Each action step should be clear, specific, and concise, serving as a direct path towards your goal.

Bonus Tip: For complex goals, consider creating sub-tasks for each action step. This will help break down your tasks even further, making them more manageable.

Step 3: Assign Responsibilities

Once you’ve identified your action steps, it’s time to assign responsibilities. Who will be responsible for each task? Ensure that every member of your team knows exactly what they’re accountable for.

Bonus Tip: When assigning tasks, consider the strengths, skills, and workload of your team members to ensure optimal task allocation.

Step 4: Identify Necessary Resources

Next, pinpoint the resources required to complete each action step. This could be financial resources, human resources, equipment, or anything else you need to execute your plan effectively.

Bonus Tip: Be realistic and comprehensive when listing your resources. Remember, inadequate resources can lead to bottlenecks in plan execution.

Step 5: Set a Timeline

Now, it’s time to ‘create an action plan’ timeline. When will each task start, and when should it be completed? Having a clear timeline ensures that your project stays on track and maintains momentum.

Bonus Tip: Allow some buffer time in your schedule to account for unexpected delays or setbacks.

Step 6: Define Success Metrics

How will you know if you’ve achieved your goal? Define clear, measurable outcomes for each action step. This will help you evaluate progress objectively and make necessary adjustments along the way.

Bonus Tip: Keep your success metrics relevant and achievable. Overly ambitious metrics can lead to demotivation and burnout.

Step 7: Establish a Follow-up Mechanism

Finally, create a process for tracking, reviewing, and adjusting progress. Regular follow-ups help ensure that your plan remains flexible and adaptable to evolving circumstances.

Bonus Tip: Regularly share progress updates with your team. Celebrating small wins along the way can boost morale and keep your team motivated.

Action Plan Success Tips

The journey from writing an action plan to setting it in motion is all about commitment, focus, and adaptability. Ensure every team member understands their role and responsibilities, and create a supportive environment where everyone is comfortable discussing progress, challenges, and suggestions.

Regular progress tracking is key. Schedule routine check-ins to evaluate whether your ‘action steps for goals’ are being carried out as planned and assess the effectiveness of your strategies. This ongoing review is crucial to maintain momentum and to make real-time adjustments as needed.

Bonus Tip: Use project management tools to aid in tracking progress and collaboration. A tool like Teamly is designed to support your team with real-time chat features, screen capturing, and task management.

Samples and Templates

A sample action plan can serve as a handy reference, particularly for those creating their first action plan. It provides a structured overview of how goals can be broken down into action steps, how responsibilities can be assigned, and how timelines can be set.

However, remember that each project is unique. While an action plan sample can be a good starting point, it needs to be tailored to fit your specific goals, team, and resources.

Similarly, templates can be useful when creating an action plan. They provide structure and guide you through the planning process, ensuring you don’t miss critical elements. However, templates aren’t without their drawbacks.

They can be rigid, restricting creativity and flexibility, which are essential when planning for dynamic goals or environments. Thus, while templates can be a good starting point, always remember to customize them to suit your unique needs.

Transitioning your action plan from a document to a roadmap for success demands perseverance, vigilance, and flexibility. The real power of an action plan comes to life only when it’s put into practice.

Action Plan Samples

Looking at real-life examples can truly illuminate the process of creating effective action plans.

Let’s delve into three action plan samples to uncover the insights they hold.

Example 1: Local Cafe’s Customer Retention Strategy

Imagine a local café aiming to boost customer retention by 15% over six months. Here’s a simplified snapshot of their action plan:

• Goal: Increase customer retention by 15% over six months.
• Action Steps: Implement a loyalty program, introduce limited-time menu items, host monthly community events.
• Responsibilities: Manager designs the loyalty program, Chef curates unique menu items, Marketing team organizes community events.
• Timeline: Roll out each initiative at the start of consecutive months.
• Success Metrics: Track return customer rate, loyalty program participation, event attendance.
• Follow-Up: Bi-weekly team meetings to assess progress.

This action plan example emphasizes the importance of customer-centric strategies in boosting retention. It illustrates the direct correlation between clear action steps, assigned responsibilities, and success metrics with the ultimate goal.

Example 2: Software Startup’s Product Development Plan

Consider a software startup working towards launching a new app feature in the next quarter. Their action plan might look something like this:

• Goal: Launch a new feature within the next quarter.
• Action Steps: Conduct market research, design and develop the feature, perform testing, prepare for launch.
• Responsibilities: Research team handles market research, developers design and build the feature, QA team performs testing, marketing prepares the launch.
• Timeline: Each action step has a dedicated timeframe within the quarter.
• Success Metrics: Completion of each action step on time, usability test results, customer feedback post-launch.
• Follow-Up: Weekly check-ins to review progress and troubleshoot issues.

This action plan illustrates the phases of product development and highlights the significance of regular follow-ups to ensure smooth execution.

Example 3: Nonprofit Organization’s Fundraising Campaign

Imagine a nonprofit planning a fundraising campaign to support a new initiative. Their action plan could look like:

• Goal: Raise $50,000 in two months.
• Action Steps: Identify potential donors, organize fundraising events , launch online donation drives.
• Responsibilities: Fundraising team identifies donors and organizes events, the digital team handles online donation drives.
• Timeline: Stagger events and drives over the two-month period.
• Success Metrics: Amount of funds raised, number of donors, event attendance, online donations.
• Follow-Up: Post-event debriefs to discuss what worked and what needs improvement.

This example demonstrates how an action plan facilitates the organization of large-scale events, focusing on the objective of raising a specific amount of funds within a defined period.

Each of these examples emphasizes the elements of an effective action plan and provides a practical, relatable context. By adapting these principles to your unique situation, you’ll be well on your way to ‘creating an action plan’ that drives success.

Each goal, each team, each organization comes with its unique context and dynamics. Tailoring your action plan to reflect these nuances is key.

While action plans are intended to guide you towards your goal, they’re not set in stone. They’re meant to serve you, not constrain you. When circumstances change, as they often do, don’t hesitate to revisit and revise your plan.

Because the most successful action plan is the one that adapts, grows, and evolves with you.

So, go ahead and harness the power of action plans. Begin by identifying your goal, breaking it down into action steps, assigning responsibilities, setting a timeline, defining success metrics, and determining a follow-up process.

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Long-Term Goals for Work: Why They Matter (With 45+ Examples)

Long-Term Goals for Work: Why They Matter (With 45+ Examples)No matter where you are in your career journey—whether you’re stepping into your first job post-graduation or have been loyal to the same company for years—setting long-term goals is central to growth. Ambitions can give your career purpose and guidance. When we think over goals, our …

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The Importance of Planning and Budgeting Alignment

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Most companies don't plan to stay the same or do the same thing forever. Even the smallest business has a vision for the future evolution of the company. Planning is the first step towards achieving growth for any organization, and budgeting is the ongoing process to manage this growth.

Planning and budgeting alignment ensures you have what you need to wisely allocate funds for growth.

Unfortunately, some companies lose sight of the connection between planning and budgeting . Companies often have budgets that conflict with their strategies, even though they recognize the connection between the two. It's a common mistake for a company’s budget to be at odds with its strategy. Aligning planning and budget is a crucial step to achieving your company's goals and objectives.

The relationship between strategic planning and budgeting

Your strategic plan is the vision for your company. It’s aspirational like a mission statement, but more pragmatic. Detailed financial plans set your organizational goals.

Your business budget should guide you in allocating resources to execute on that vision. The budgeting process ensures that you convert your company's raw materials — personnel, money, tools — into efficient business operations.

When you create a budget, avoid allocating funds for operations and smaller projects that don't feed into the larger plan.

At the same time, make sure your plan is realistic. Realistic goal setting helps you make smarter business choices and avoid budget overextension down the line. A plan that tries to do everything at once and falls short because ends up hurting your high level goals.

Aligning your budget with your corporate vision is easier said than done. Here are three keys to aligning your strategic planning and budgeting processes.

Create business budgets with strategic plans in mind

Most business plans span a longer period than 12 months. Most budgets look at a specific 12-month period, or annual budget. There are a few ways to reconcile these differing timelines, including rolling budgets (see below).

If your business maintains an annual budget, be sure to include long-term plans and goals into the budgeting process early. This is the best way to avoid allocating funds to short-term projects that don't advance your financial goals.

Build transparency into budgeting and planning processes

Most companies have separate teams that handle planning and budgeting processes. The team members that set the strategic plan are not always the same people that define the nitty gritty budget details.

It’s impossible for the finance team to support the larger business plan if they don’t know what it is. Executives must transparently to communicate high level goals to directors and managers. This allows them to allocate resources to strategic projects at the appropriate time and to make better business decisions.

Review, measure, and adjust budgets and plans

Organizations need to measure strategic progress against their defined goals. They also need to regularly ensure that their plans aren’t outpacing the actual budget.

A dip in sales, a hiccup with suppliers, a financial change for potential investors — any of these factors can throw a wrench into your plans.

You can ensure that your planning remains nimble by adopting a rolling budget . Rolling budgets help companies adjust quickly to meet new business demands while still sticking to a larger plan. Regularly reviewing budgets helps to quickly identify and address any changes from the original budget. This in turn allows the company to remain flexible and achieve its objectives.

Planning and budgeting  are both important to the stability and growth of a company. A company must closely align and review these two processes to successfully maintain its growth and meets its goals.

Want to learn more about how our formula-free approach to FP&A software is helping businesses with planning & budget alignment? Book a demo to see it in action.

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What’s the difference between a plan, a budget, and a forecast?

Budgeting & forecasting.

Updated: September 29, 2023 |

Jake Ballinger

FP&A Writer, Cube Software

Jake Ballinger is an experienced SEO and content manager with deep expertise in FP&A and finance topics. He speaks 9 languages and lives in NYC.

“Remind me, what’s the difference between the plan and the forecast?” is something we often hear from executives looking for clarity.

While a company’s plan, budget, and financial forecast are often discussed in the boardroom, these terms’ functions are not always precise.

Finance leaders commonly use the three terms in conjunction with one another, allowing each model to inform the others. 

So...are they interchangeable? No.

In fact, financial forecasting, budgeting , and planning each serve a unique purpose. A plan serves as the foundation, a budget guides how to allocate cash, and a forecast projects the financial future of the business.

CFOs understand that each is a standalone piece of the company’s financial puzzle.

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Financial planning: explained

Generally, a financial “plan” aims to define the financial direction and vision of the organization within the context of a broader business plan.

Leaders ask themselves how the business will stack up in the next 1, 5, or even 10 years. The “plan” answers that question by outlining the company’s operational and financial objectives. Executives build out teams and infrastructure based on this plan and the defined goals. 

Colloquially, the “plan” is sometimes used interchangeably with the most recent budget or forecast, and can be broadly considered the budget or forecast that is the most likely “version of truth”.

Because of the long-term nature of a financial plan, it allows for more flexibility and creativity. In the case of a financial plan (versus a budget, for example), the means are less important than the end. Ultimately, a good financial plan provides a top-down operational framework to explore various scenarios.

Because an organization's future is undefined, financial planning is a perpetual process. Despite this, a plan is more static—more of a roadmap than a document updated daily. The plan relies on historical performance data and subjective financial analysis, so it can never be fully accurate. 

Budgeting: explained

Businesses, but most commonly, the Finance team, compile a budget to determine how the company will spend its capital during the next period—a month or quarter, but typically a fiscal year.

The budget’s primary goal is determining what resources to allocate to each part of the company, from salaries to office supplies. The focus of a budget revolves around cash position, including expected revenues and expenses, to create specific financial goals for the foreseeable future.

Most businesses create a budget annually and implement it from the start of the fiscal year.  The budget is also commonly considered “unmovable” and is used to gauge performance of actuals or forecast data versus the planned budget.

A thorough budget offers clear guidance on how a company should be spending its resources by providing a line item for any expense imaginable. Budgets also create accountability for departmental spending because overages are apparent and gaps in appropriate funding become clear as the year unrolls.

Teams should review the budget regularly and compare it with actuals, making each department responsible for any variances that occur.

A budget aligns expectation with reality when it comes to revenue and expenses.

Budgeting can be a difficult process because of the kind of involvement it takes across departments, including meetings and negotiations with department leaders to determine the amount of cash they will need to accomplish business goals over the budget. Since budgets are generally made to last an entire year, a budget might constrain necessary spending (or saving) if any unexpected situations in cash flow arise.

Essentially, expense allowances are built not to exceed budget limits, while income projections are the minimum needed to balance the budget. Financial analysts need to calculate the variances between the two figures to evaluate the budget's efficacy and the organization's fiscal health.

Forecasting: explained

A forecast is a financial snapshot of the future as it is best understood today.  When creating a forecast , teams must examine possible financial outcomes based on the most up-to-date drivers and assumptions . The result is a view of how the business is trending so that the leaders can determine whether or not adjustments should be made to the existing budgets or plans.  

For example, the budget might assume that the business will hit a $10M revenue target, but the forecast shows that the business is on target to only achieve $8M.  Given the difference between the forecast and the budget, the business might adjust the variable costs associated with lower revenue, while simultaneously adjusting the expense plan in order to hit cash targets.

A company’s financial forecast is updated regularly, such as monthly or quarterly. The forecast’s undefined nature allows it to be used for both short- and long-term projections and adapt to recent performance data. In this way, executives can make changes in real-time, adjusting their operations, such as production, marketing approach, and staffing. 

Forecasting can be a time-consuming process that not all businesses are able to stay on top of regularly.  Because of this, many businesses update their forecast data periodically, such as quarterly or biannually.  It’s considered a best practice to build a rolling (ongoing) forecast to make these adjustments in real-time.

Conclusion: Plan vs. budget vs. forecast

All three terms reflect expectations and estimates of financial objectives. Financial planning lays the foundation for budgeting, suggesting that a financial plan must precede the budget so that company leaders have an idea of what they are budgeting for. Meanwhile, a forecast projects how far over or under expectations a company may be.

A financial plan is a strategic, long-term tool, while a budget is tactical and short-term. A financial forecast is an updated reflection of the future. In a way, the forecast bridges the gap between the business plan and the budget. 

The most financially disciplined businesses leverage all three tools in planning and operations. Financial modeling software like Cube can help companies build multiple plan scenario types, including budgets, forecasts, and even what-ifs, in a way that allows leaders to visualize data, analyze past performance, and calculate how decisions may affect future goals.

Want to see how Cube can accelerate your financial planning? Get a demo today. 

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Action Plan vs. Strategy

What's the difference.

Action plan and strategy are two important concepts in the field of management and planning. While both are used to achieve specific goals, there are some key differences between the two. A strategy is a broad and long-term plan that outlines the overall direction and approach to be taken to achieve a desired outcome. It involves analyzing the external environment, setting objectives, and determining the best course of action. On the other hand, an action plan is a more detailed and specific plan that outlines the tasks, timelines, and resources required to implement the strategy. It breaks down the strategy into actionable steps and assigns responsibilities to individuals or teams. In summary, a strategy provides the overall framework, while an action plan provides the specific steps to execute the strategy.

Further Detail

Introduction.

When it comes to achieving goals and objectives, organizations often rely on the implementation of action plans and strategies. While both action plans and strategies are essential tools for success, they differ in their attributes and approaches. In this article, we will explore the characteristics of action plans and strategies, highlighting their similarities and differences, and understanding when each is most appropriate.

Action Plan

An action plan is a detailed outline of specific steps and tasks required to achieve a particular goal or objective. It focuses on the short-term actions necessary to accomplish a specific outcome. Action plans are typically more tactical and operational in nature, providing a clear roadmap for individuals or teams to follow. They are often time-bound and include specific deadlines and milestones to track progress.

One of the key attributes of an action plan is its specificity. It outlines precise actions that need to be taken, leaving little room for ambiguity. This level of detail helps individuals understand their responsibilities and ensures everyone is on the same page. Additionally, action plans are often created collaboratively, involving input from various stakeholders, which fosters a sense of ownership and commitment.

Another important attribute of an action plan is its focus on execution. Action plans are designed to drive immediate action and produce tangible results. They break down larger goals into smaller, manageable tasks, making it easier to track progress and make adjustments along the way. By providing a clear roadmap, action plans help individuals and teams stay focused and motivated, ensuring they are moving in the right direction.

Action plans are particularly useful in situations where there is a need for quick decision-making and implementation. They are commonly used in project management, crisis management, and day-to-day operations. Action plans are effective in addressing short-term challenges and achieving specific targets within a defined timeframe.

However, it is important to note that action plans may lack a broader perspective. They often focus on immediate actions without considering the long-term implications or the overall strategic direction of an organization. This is where strategies come into play.

A strategy, on the other hand, is a high-level plan that outlines the overall direction and approach an organization will take to achieve its long-term goals. Unlike action plans, strategies are more comprehensive and encompassing, providing a framework for decision-making and resource allocation. Strategies are typically developed by top-level management and involve a thorough analysis of internal and external factors.

One of the key attributes of a strategy is its focus on the big picture. It takes into account the organization's vision, mission, and values, aligning them with the external environment and market conditions. Strategies provide a roadmap for the future, guiding the organization's growth and development. They help identify opportunities, mitigate risks, and allocate resources effectively.

Another important attribute of a strategy is its flexibility. Unlike action plans, strategies are adaptable and can be adjusted based on changing circumstances. They allow organizations to respond to market dynamics, technological advancements, and competitive pressures. Strategies provide a framework for decision-making, enabling organizations to make informed choices and prioritize initiatives that align with their long-term objectives.

Strategies are particularly useful in situations where there is a need for long-term planning and organizational alignment. They are commonly used in strategic management, business development, and market expansion. Strategies help organizations navigate complex environments, anticipate future challenges, and position themselves for sustainable success.

However, strategies may sometimes lack the level of detail and immediate action required to achieve short-term goals. This is where action plans complement strategies, providing the necessary tactical steps to execute the broader strategic vision.

Action plans and strategies are both essential tools for achieving organizational goals and objectives. While action plans focus on short-term execution and immediate results, strategies provide a long-term vision and framework for decision-making. Action plans are specific, time-bound, and operational, while strategies are comprehensive, adaptable, and strategic. Both action plans and strategies have their place in organizational planning and management, and their effective integration can lead to successful outcomes.

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Financial Forecasting

Key differences, special considerations.

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Budgeting vs. Financial Forecasting: What's the Difference?

Budgeting vs. Financial Forecasting: An Overview

Budgeting and financial forecasting are tools that companies use to establish a plan for where management wants to take the business —budgeting—and whether it is heading in the right direction—financial forecasting.

Although budgeting and financial forecasting are often used together, distinct differences exist between the two concepts. Budgeting quantifies the expected revenues that a business wants to achieve for a future period. In contrast, financial forecasting estimates the amount of revenue or income achieved in a future period.

Key Takeaways

• Budgeting is the financial direction of where management wants to take the company.
• It helps quantify the expectation of revenues that a business wants to achieve for a future period.
• Financial forecasting tells whether the company is headed in the right direction, estimating the amount of revenue and income that will be achieved in the future.
• Budgeting creates a baseline to compare actual results to determine how the results vary from the expected performance.
• Financial forecasting is used to determine how companies should allocate their budgets for a future period.

A budget is an outline of expectations for what a company wants to achieve for a particular period, usually one year. Characteristics of budgeting include:

• Estimates of revenues and expenses
• Expected cash flows
• Expected debt reduction
• A budget is compared to actual results to calculate the variances between the two figures.

Budgeting represents a company's financial position, cash flow , and goals. A company's budget is typically re-evaluated periodically, usually once per fiscal year , depending on how management wants to update the information. Budgeting creates a baseline to compare actual results to determine how the results vary from the expected performance.

While most budgets are created for an entire year, that is not a hard-and-fast rule. For some companies, management may need to be flexible and allow the budget to be adjusted throughout the year as business conditions change.

Financial forecasting estimates a company's future financial outcomes by examining historical data. Financial forecasting allows management teams to anticipate results based on previous financial data. Characteristics of financial forecasting include: 

• Used to determine how companies should allocate their budgets for a future period. Unlike budgeting, financial forecasting does not analyze the variance between financial forecasts and actual performance.
• Regularly updated, perhaps monthly or quarterly, when there is a change in operations, inventory, and business plan
• Can be created for both the short term and long term. For example, a company might have quarterly forecasts for revenue. If a customer is lost to the competition, revenue forecasts might need to be updated.
• A management team can use financial forecasting and take immediate action based on the forecasted data.

Financial forecasting can help a management team make adjustments to production and inventory levels. Additionally, a long-term forecast might help a company's management team develop its business plan. 

A financial forecast is usually limited in scope, focusing on expense line items and major streams of revenue.

There are critical differences between budgeting and forecasting. For example, budgets are created to meet a goal, such as quarterly growth. Financial forecasting examines whether the budget's target will be met or not throughout the proposed timeline. The content of a budget and financial forecast is different—the former contains specific goals like the number of items to sell or the amount of money to earn. The latter shows the expectations of how the budget will be met.

A budget is made for a specific period and is usually based on past trends or experiences of the company. A financial forecast examines a company's current financial situation and uses the information to forecast whether or not a budget will be met. Financial forecasting may be done frequently while a budget is set for a specific time period and may not be done more than annually, biannually, or quarterly.

A budget outlines the direction management wants to take the company. A financial forecast is a report illustrating whether the company is reaching its budget goals and where it is heading in the future. 

Budgeting can sometimes contain goals that may not be attainable due to changing market conditions. If a company uses budgeting to make decisions, the budget should be flexible and updated more frequently than one fiscal year, which is a relationship to the prevailing market.

Budgeting and financial forecasting should work in tandem with each other. For example, both short-term and long-term financial forecasts could be used to help create and update a company's budget. A budget may not always be necessary during a fiscal year, although many companies make them. However, a financial forecast is relevant because the information it provides can highlight the need for action. In contrast, a budget may contain targets that cannot be accomplished if the budget is an overreach.

How Can a Budget Help With Financial Planning?

A budget can help set expectations for what a company wants to achieve during a period of time such as quarterly or annually, and it contains estimates of cash flow , revenues and expenses, and debt reduction. When the time period is over, the budget can be compared to the actual results.

What Comes First, a Budget or a Forecast?

Typically a budget is created before a financial forecast. A budget reveals the shape or direction of a company's finances, while the forecast tracks whether or not the company is meeting its financial goals as outlined in the budget. Long-term financial forecasting may be done without first having a budget, but it would likely use past key indicators from previous budgets.

What Are the Steps of Financial Forecasting?

When a company creates a financial forecast report, it will decide on a time frame for the forecast and then gather all past financial documents and necessary paperwork around the time frame. The report will document, monitor, and analyze critical data such as cash flow and income statements, and balance sheets.

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How To Create A Strategic Action Plan In 7 Easy Steps

Do you have plenty of goals, but struggle to move closer to targets? Without a strategic action plan, many leaders fail to drive progress, and they waste a lot of time and money trying.

The root of this problem lies in fragmented planning and tracking systems, which causes a lack of visibility and accountability across the organization. In this disconnected environment, critical action items fall through the cracks—and business objectives become an impossible quest.

A strategic action plan and centralized tracking system help you foster a culture of accountability and strategic focus within the organization, helping you align short-term operational needs with long-term strategic goals. 

In this guide, we’ll help you ensure the fast and effective execution of your strategic plans by laying out the seven essential steps of strategic action plans—and how you can do it in a strategy execution platform.

How Cascade Helps You Build And Execute Strategic Action Plans  

Cascade is a strategy execution software that makes it easy for leaders to bring together planning, execution, and tracking in one place. 

It offers complete visibility into what's happening across disconnected systems, spreadsheets, and project management tools with a clear, central view that unites siloed metrics, initiatives, and investments. 

You won't have to juggle different tools or get lost in details. Instead, you'll see how everyone's work fits into the big picture.

With Cascade, you empower your teams with great focus, visibility, and accountability on all business plans, actions, and objectives. The result? Better decision-making and faster results without wasting resources.  

Businesses like Honeywell, Porsche, and Johnson & Johnson find our platform accelerates results by 30% and saves an average of $20M on previously misaligned projects & resources.

But this success is not by chance. You need a strategic action plan to ensure fast and effective execution of the strategic plan with optimal resource utilization and minimal waste.

Below, we’ll show you how to effectively build, execute, and track your strategic action plans—and how Cascade makes it easier.

7 Critical Steps to Create Successful Strategic Action Plans 

Any Chief Strategy Officer (CSO) worth their salt knows that a strategic plan is just the beginning—you need a strategic action plan to communicate how you will make your plan a reality.

Otherwise, all your best-laid plans will amount to little more than a fancy but soon-forgotten mission statement. 

Let’s dive into the seven key steps to develop, execute, and track strategic action plans:

1. Align your action plan with a strategic plan 

Without clear alignment and relationships , your actions have little impact on the organization’s strategy. In the long run, misaligned efforts in your strategic planning process drain your budget.

Before developing a strategic action plan, CSOs should define strategic objectives and core business metrics . With this foundation, you can build action plans that help teams stay on track toward the organization's strategic goals. 

Most companies struggle with strategic alignment because they rely on disparate systems—like spreadsheets and slide decks. But when you bring everything and everyone together on one platform, you can break down silos between different business units and improve cross-functional collaboration .

👉 Here’s how to do it in Cascade:

You can use Cascade’s Planner to create Focus Areas, strategic objectives, Key Performance Indicators (KPIs), and targets. When you define your strategic objectives, you can start adding actions (action plans) that will directly contribute to the success of those strategic objectives.

📚Want to learn how to write a strategic plan that gets results? Check our guide .

2. Let teams develop feasible action plans 

Many strategies fail because the teams responsible for executing them aren't involved in the planning process. 

Gallup reports that 85% of employees are disengaged, which is sure to dent productivity and company morale. 

On the other hand, McKinsey reports that initiatives in which employees contribute to development are 3.4 times more likely to succeed. They feel ownership of the plan and are more likely to execute the key action steps. 

You must find ways to empower teams so they can build strategic action plans that align with the overarching strategic objectives. 

To do so, ask:

• Which mediums will you use to communicate strategic objectives and priorities? (e.g., workshops, live Q&As, etc.)  
• How can you communicate the right amount of information without burdening people with unnecessary details?
• How much time does each team have available to build plans and carry out action items?

Cross-functional collaboration and clear communication are vital. An open approach is the only way to develop work plans that consider the actual organization’s situation and capabilities. 

When you share strategic plans with your teams, you provide a platform for employees to contribute ideas, provide feedback, and collaborate on driving the outcomes leadership wants to achieve. 

In Cascade, you can assign a team to a plan when you create a plan from scratch or add teams to an existing plan later through the Planning stage. 

Additionally, you can manage team permissions to keep complete control over who can view or edit plans.

3. Allocate resources

Even the best strategic action plan will flounder if you don't have the right resources. Specifically, you must ensure your budget, people, partners, and tools are all in sync and high supply.

Of course, getting your ducks in a row and staying on budget is easier said than done. 

Effective resource management will make or break your efforts—especially when it comes to budget. Even if you have deep pockets, you might meet some resistance from employees or key stakeholders. 

As you allocate resources across projects, take the following steps:

• Consider your revenue goals to accurately estimate how much you need to sell to hit your targets. SMART goals help guide this stage of your operational planning.
• Collaborate with department heads to assess resources and confirm whether you have enough workforce, equipment, and time available. 
• List expenses to get a complete picture of all unit economics, from materials and labor to marketing and new equipment. 

The onus is on CSOs and company leaders to do their due diligence. Only then will you be able to effectively allocate resources and communicate the value of the strategic action plans to your teams.

You can link your resources and objectives by using Cascade for budget allocation and tracking. The budget custom field lets you set your allocated, forecast, and spent values. As your teams take action, you can update the relevant values to capture data and see a progress bar of the allocation vs. actuals.

4. Assign owners

Many companies operate with fragmented planning and tracking systems, which poses a significant challenge in monitoring progress—or even keeping tabs on who is responsible for specific action items. 

Without clear accountability in your strategic action plan, progress falls by the wayside, and projects stall. Without ownership, people pass the buck, leaving the whole organization to pay the price when things don’t work out.

Using a strategy execution platform like Cascade introduces a layer of accountability across the organization. As you cultivate an ethos of clear communication and performance tracking, employees understand their roles and impact on business objectives.

You can add owners and collaborators to actions or projects (sets of actions) in Cascade. 

Improve operational clarity by defining one specific owner for every project, KPI, goal, or objective in your plan. This ownership helps you connect people to company goals from the bottom up.

• The Owners field automatically defaults to the one who creates the action. To change it,  click the owner profile icon, then choose the user from the dropdown list.
• ‍ From the Collaborator area , you can add or manage collaborators to let them add or edit actions, change owners, due dates and targets, add risks and relationships, etc.

5. Set timelines for action

Parkinson’s Law dictates that work will expand in complexity and perceived importance to fill the time allotted for completion. If your strategic action plan doesn’t have a roadmap charted with precise due dates, it's destined for a prolonged, drawn-out failure. 

Without deadlines, your team has little motivation to act and less understanding of how to prioritize critical initiatives. In the long run, a laissez-faire approach to timelines will lead to bloated projects that drain resources. 

As the wheels of progress grind to a halt, company morale can dip. Not great news for your strategy!

Strategic objectives should have a clear deadline, so every team member knows their duties are time-bound. You must carefully consider the details of each project and the resources available to set a realistic time frame. The goal is to create a sense of urgency and prevent procrastination. 

Cascade lets you add a Start date and End date for action items in your plan, which will set a timeline for your action. Based on the due dates, Cascade calculates the expected progress and target completion time for the action, which helps you gauge its health over time.

You can also set Time Horizons , which enable you to create goals and select predefined date periods (time horizons) that reflect your strategy and governance cycle. 

6. Define how you will measure progress

Many strategic action plans dwindle and die in spreadsheets. While Excel is a familiar tool for many companies, it is inefficient for tracking progress .

The faster you move, the harder it will be to maintain an accurate view of your real-time data. And despite your best efforts, this cumbersome approach is inevitably time-consuming and error-prone. Soon enough, you’ll miss warning signs or opportunities for improvement.

Let’s be blunt—your strategy won’t survive if you aren’t measuring progress with reliable tracking tools. Get these key aspects in place from day one:

• Clear targets. Each team must have milestones that have concrete numbers. All initiatives, projects, and actions must link so teams can see how they drive progress. 
• Key Performance Indicators (KPIs) . These measurable values track your progress toward achieving business objectives.
• Dashboards and reports . A simple way to measure and visualize the results of your actions and correlate those results to the strategy's overall success (or failure). 

This data-centric approach gives you a clear lens to assess performance. Better yet, you can base your decisions on hard evidence, not just guesswork or gut feeling.

In Cascade, you can track action in several ways—either manually, via milestones, checklists, or by integrating with other business tools. 

Cascade gives you the freedom and flexibility to connect 1000+ business tools, including Jira , HubSpot , Salesforce , and more. Our smart integrations allow you to bring your data together from other apps and plan, manage, and track all your goals in one place.

7. Monitor and review performance  

Gartner reports that 58% of businesses operate with subpar performance monitoring systems. Without adequate systems to analyze the impact of your strategy, it will be impossible to improve it. 

And right here is where many organizations falter. It could be misplaced faith in static reporting tools like Excel or disconnected systems that complicate the real-time collection and data analysis.

The truth is that strategy succeeds through an iterative approach that thrives on continuous monitoring and corrective action. By closely monitoring key performance metrics , you can catch red flags before they become roaring fires. 

Through regular strategy reviews , companies can also identify patterns and trends to equip leaders with the data to make confident decisions.

This ongoing feedback loop allows you to respond to market changes or internal shifts, ensuring the organization remains on track toward its strategic goals.

Once teams start executing action plans, you can track and review progress in Cascade in three ways:

• By creating custom update templates for teams. Gather quality strategic context by defining the type of information to collect. For example, you can create templates linked to specific updates, goals, or teams. 
• By monitoring progress using Dashboards . These visualizations help you (and your stakeholders) gauge an accurate picture of your strategic performance by tracking key metrics and critical business information live. 

• By reviewing progress with Reports . You can select a data set based on the context and narrative you're trying to communicate and present it in an easily shareable format. For instance, you could use Performance reports to communicate with partners about your projects.

Use Cascade To Execute Your Strategic Action Plans Faster 

Strategic action plans help you direct all efforts to stay on track toward your business objectives.

Of course, it’s still a challenge to manage strategy if you have scattered business metrics and siloed teams—unless you use a centralized strategy execution platform.

Cascade brings your operating and financial business-level goals together with your strategy under one roof. As the only platform that spans the entirety of your ecosystem, it makes it easy to understand the relationships between your business inputs and outcomes. 

As you centralize strategy this way, your teams will have better visibility, accountability, and focus—everything your strategy needs to succeed.

Ready to build, execute, and track strategies the smart way? Book a live demo to see how Cascade can accelerate success for your company.

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Creating an Effective Project Budget Plan: A Comprehensive Guide

• Updated on August 19, 2024

Project managers often find themselves caught in a paradox: the budget is simultaneously the most crucial and the most elusive aspect of project planning . While we’re taught to meticulously craft Gantt charts and risk registers, the art of budget planning often remains shrouded in mystery, relegated to finance departments, or treated as a necessary evil.

But here’s a truth seldom discussed in project management circles, your budget isn’t just a financial document—it’s a strategic roadmap that can make or break your project’s success. Imagine a budget that doesn’t just constrain but empowers—a living document that evolves with your project, anticipates challenges, and unlocks opportunities.

In this guide, we’ll delve deep into the art and science of creating a project budget plan that goes beyond basic arithmetic. We’ll explore how to craft a budget that not only accounts for costs but also aligns with your project’s strategic goals, adapts to changing circumstances, and provides actionable insights throughout the project lifecycle.

Whether you’re managing a traditional waterfall project or navigating the complexities of an agile environment, mastering the nuances of budget planning will elevate your project management skills to new heights. 

Understanding Project Budget Plans

A project budget is not just a ledger of costs and revenues; it’s a strategic tool that aligns your financial resources with project goals. It guides project execution, facilitates stakeholder communication, measures performance, and manages risks. However, many project managers treat the budget as a static document, failing to adapt it to changing circumstances. A truly effective budget plan should be as agile as the project itself, evolving while maintaining fiscal discipline.

A comprehensive project budget includes direct costs like labor, materials, and subcontractor fees, along with indirect costs such as overhead and compliance fees. Contingency reserves, cash flow projections, and a cost baseline are also essential components. Often overlooked are opportunity costs and value-added metrics, which are increasingly important as projects are expected to deliver strategic value, not just stay within budget.

Creating an Effective Project Budget Plan

Building a comprehensive project budget is a critical yet challenging aspect of project management. There are many essential components to include, such as direct and indirect costs, fixed and variable costs, labor and materials, travel, equipment and space, licenses, and any other factors that may impact project expenses.

To create an effective project budget plan, a multifaceted approach is required. Before diving into the numbers, it’s crucial to define the project’s scope and objectives clearly. This involves conducting a value stream mapping exercise, performing a stakeholder value analysis, and implementing a scope-to-budget matrix to ensure alignment between the budget and the project’s strategic goals.

Next, identifying all potential costs is key to creating a comprehensive budget. Utilizing AI-powered cost prediction tools, holding cross-functional cost identification workshops, and developing a cost risk register can help uncover hidden or non-obvious expenses. Accurately estimating resource requirements, through methods like parametric modeling and skills-based resource allocation, is also essential.

Leveraging historical data and lessons learned from past projects can provide a valuable starting point for building the budget. Tapping into the expertise of mentors, project managers, and subject matter experts can also help project teams stay on track and avoid common pitfalls. Proactively managing risks and contingencies is another crucial step. By implementing Monte Carlo simulations, a tiered contingency system, and a risk-adjusted budget, project managers can take a more strategic approach to budget planning and control.

Finally, establishing a dynamic timeline, using techniques like rolling wave planning and milestone-based budget gates, can help maintain budget flexibility and visibility throughout the project lifecycle. Integrating real-time budget tracking and reporting capabilities can further enhance the project team’s ability to monitor and control the budget effectively.

Best Methods for Project Budget Estimation

Estimation is where art meets science in project budgeting. Let’s explore some advanced techniques that go beyond traditional approaches.

1. Top-Down Budgeting

Top-down budgeting starts with an overall budget figure and breaks it down into components. This approach allows project managers to leverage machine learning algorithms to refine historical comparisons through analogous estimation. Additionally, implementing a strategic allocation model can help distribute the budget based on organizational priorities. To further enhance this method, project managers can develop a cascading budget framework that enables autonomous team-level budgeting within the overall constraints.

2. Bottom-Up Budgeting

In contrast to the top-down approach, bottom-up budgeting builds the budget from individual components. This method utilizes activity-based costing to accurately assign costs to specific project activities. By implementing a collaborative estimation platform, project teams can input and justify their budget needs, ensuring transparency and buy-in. To account for uncertainties in individual cost components, project managers can employ stochastic estimation techniques.

3. Parametric Estimating

Parametric estimating uses statistical relationships between historical data and variables to generate budget projections. This technique requires project managers to develop custom parametric models tailored to their organization’s unique project characteristics. By implementing machine learning algorithms, these models can be continuously refined and improved to enhance the accuracy of the estimates. To make this process more efficient, project managers can create a parametric estimation dashboard in NimbleWork, a platform that provides quick, data-driven budget projections.

4. Three-Point Estimating 

Three-point estimating considers optimistic, pessimistic, and most likely scenarios to provide a more comprehensive budget projection. This approach enhances the traditional PERT (Program Evaluation and Review Technique) estimates by incorporating risk-weighted scenarios. Additionally, by using Monte Carlo simulations, project managers can generate probability distributions for budget outcomes, enabling them to make informed decisions. To ensure the model remains dynamic, project managers should implement a three-point estimation model that updates in real time as project conditions change.

Common Pitfalls in Project Budget Planning

Even the most experienced project managers can fall prey to budget planning pitfalls. By understanding these common mistakes, you can fortify your budgeting process and ensure more accurate, effective financial management. 

1. Underestimating Scope Creep 

Scope creep is a silent budget killer, often lurking beneath the surface of seemingly innocuous change requests. The pitfall lies in failing to account for the cumulative impact of minor scope changes. To avoid this, implement a change impact analysis tool that automatically calculates the budgetary effect of each scope modification. Additionally, create a ‘scope bank’ where additions to scope must be balanced by reductions elsewhere.

2. Neglecting Hidden Costs

Many budgets fall short because they focus solely on obvious, direct costs while overlooking less apparent expenses. Ignoring costs like team training, software licenses, or compliance requirements. Develop a comprehensive cost checklist that includes often-forgotten items and utilize AI-powered cost discovery tools to identify potential hidden expenses based on project characteristics.

3. Overreliance on Historical Data

While historical data is valuable, relying too heavily on past figures can lead to inaccurate estimates, especially in a rapidly changing business environment. Applying outdated cost structures to new projects without considering technological or market changes is a common mistake. Instead, implement a ‘future-proofing factor’ in your estimation process that accounts for anticipated changes. Utilize trend analysis and predictive modeling to adjust historical data for current and future projects.

4. Inadequate Risk Quantification

Generic contingencies often fail to address specific risks. Instead, create a risk-adjusted budget model that links particular risks to corresponding budget items. Developing a risk-adjusted budget model that ties specific risks to budget line items and using probabilistic budgeting can provide a more realistic range of budget scenarios based on potential risk events. 

5. Ignoring the Time Value of Money 

For longer projects, failing to account for inflation, currency fluctuations, or opportunity costs can distort budget accuracy. Creating static budgets that don’t consider these financial changes over time is a significant pitfall. To address this, implement a time-phased budgeting approach that factors in projected financial changes. Utilizing Net Present Value (NPV) calculations for budget items can also account for the time value of money, ensuring a more accurate financial plan.

6. Siloed Budgeting Process 

Creating a budget in isolation from other project processes and stakeholders can lead to misalignment and unrealistic expectations. Developing the budget without input from key team members or stakeholders can lead to confusion and chaos. Using a collaborative budgeting platform where team members can contribute insights and estimates, and implement regular budget review sessions that align financial planning with project strategy and stakeholder expectations are crucial for maintaining budget integrity.

Monitoring and Controlling the Project Budget

Creating a budget is just the beginning; the real challenge lies in effectively monitoring and controlling it throughout the project lifecycle. Real-time budget tracking, predictive analytics, and rolling wave budgeting are essential tools for maintaining control, replacing the outdated approach of monthly reports. 

☑ Real-Time Budget Tracking : Utilize dashboards for instant visibility and set up automated alerts for variances. This proactive approach helps address issues before they escalate.

☑ Predictive Analytics : Anticipate budget issues by analyzing spending patterns and project progress. Predictive models simulate the impact of decisions on the budget, enabling informed choices.

☑ Value-Driven Budgeting : Focus on the value delivered rather than just the cost. Develop a system to track value realization and use metrics to ensure that spending is justified by the value created.

☑ Proactive Budget Reviews : Schedule regular budget health checks to analyze trends and address issues. A budget health scorecard can assess financial performance and control.

Project budget planning has evolved into a crucial strategic element in project management, beyond just cost estimation and tracking. It’s now about crafting a flexible financial framework that aligns with project goals, anticipates risks, and drives value.

The techniques and strategies we’ve covered, from AI-powered cost prediction to value-based budget control, represent the forefront of project financial management. By adopting these methods, project managers can turn budgets from mere constraints into opportunities for success.

To fully harness these advanced budgeting techniques, the right tools are essential. This is where Nimble excels, offering real-time budget dashboards, AI-driven forecasting, integrated time and expense tracking, customizable workflows, and collaborative platforms—all designed to make complex financial data accessible and actionable.  Remember, effective budget planning is both an art and a science, and with the right tools and mindset, your project budgets can become powerful assets for achieving success and delivering exceptional value. Sign up for a  Free trial of Nimble.

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