BUDGETING AOP

Business planning and budgeting

Business planning is critical to any business. Often performed as an annual exercise, the business plan is the volume, cost, and profit plan for the coming year. This is also known as the annual budgeting process.

Some companies do this as part of the long-term forecasting process, which spans three to seven years. The long-term forecasts are indispensable for companies with longer product development cycles. It provides input for capacity planning and other long-term expansion initiatives.

It is well known that longer-term forecasts are more inaccurate than short-term forecasts. There are more dynamic variables and error processes involved in determining the conditions that are expected to prevail in the future. So it is necessary to subject your prediction to a sensitivity analysis to understand the robustness of the prediction.

Valtitude has developed a unique methodology to develop long-term forecasts and analyse the sensitivity of the forecasts.

Often, the annual marketing plan is the driver of the demand information in the annual budget. The marketing plan is developed with a volume forecast for the year along with the spending levels required to create and maintain the expected demand for the products. The process for predicting market share is explained here. Marketing mix modelling is an important part of developing the marketing plan. The business plan or annual budget often follows the following main lines:

• Capacity and other bottlenecks
• Organizational agreement 
• revisions of editions and volumes
• Management buy-in
• Internal factors. 
• Drawing up a sales and marketing plan
• Monthly forecast calendar
• Strategic analysis of external factors

– Economical 

– Politics 

– Competitive 

operating budget 

Production costs

Administrative costs

Sales and marketing costs