Strategic Planning and Budgeting: A Comprehensive Guide

Posted on Sep 9, 2024 in Economy

Strategic Planning

Conceptualization of Strategic Planning

Some authors, such as Almeida Fischmann, conceptualize strategic planning as a technical administrative process. By examining the environment of an organization, strategic planning creates awareness of its opportunities and threats, as well as its strengths and weaknesses, in relation to fulfilling its mission. Through this awareness, it establishes the purpose and direction the organization should follow to seize opportunities and avoid risks.

Key Aspects of Strategic Planning

Within that expectation, we can add the following true statements:

  1. The strategic plan should provide answers to the need to prepare the company for a future that would not be a simple projection of the past.
  2. The strategic plan should provide answers to the need to prepare the company comprehensively and systematically.

Strategic Decision-Making

Deciding in advance is about controlling your own future. This is a rather proactive approach in relation to the management process of a certain organization. Ansoff believes that organizations must make decisions of three types: strategic, administrative, and operational. To enrich the understanding of strategic decisions, we add the following true statement:

  1. Strategic decisions are aimed at external problems, more specifically related to the choice of composite products and markets where such products will be placed.

Flowcharts in Procedures

Procedures are usually transformed into routines and externalized in the form of flowcharts, which are graphs that represent the flow or sequence of procedures or routines. With a focus turned to horizontal flowcharts, we can state the following true aspects:

  1. They emphasize the bodies or persons involved in a procedure or routine.
  2. They can display the portion applicable to everyone involved in the process.
  3. They allow for comparison of the distribution of tasks among those involved in the process for possible rationalization or redistribution.
  4. They provide an existing idea of participation, in order to facilitate the work of coordination and integration.

Human Personality

The human personality is composed of two factors: hereditary and environmental (genetic heritage and learning). By citing evidence from the factor of genetic inheritance, we can affirm that its components are:

  1. Sex and Stature
  2. Features, instinct, and impulses
  3. Physiological and biological structure
  4. Primary needs

General Budget

Definition and Importance

According to Moreira (1989:15), a general budget is “A set of plans and policies, which, formally established and expressed in financial results, allows the administration to know a priori the Company’s operating results and then perform the necessary accompaniments to ensure that these results are achieved and possible deviations are analyzed, evaluated, and corrected.”

Types of Budgets

In this scenario, we mention the following types of budgets required in a company:

  1. Budget sales
  2. Production Budget
  3. Budget raw materials
  4. Budget manpower
  5. Budget overhead costs
  6. Budget cost of production
  7. Overheads budget, administrative and sales
  8. Capital budgeting (investment)
  9. Budget investments and financing
  10. Budget box
  11. Budget outcome

All of the listed budgets are required in a company.

Budget Planning and Timeframes

Short-Term and Long-Term Planning

Administrators dealing with budget and planning issues are always directed at determining the extent of the planning period that best suits their business. Some true statements are posted within this scenario:

  1. Planning in the short term is usually for one year or one semester, coinciding with the company’s fiscal year, being presented monthly for the first three months or six months in quarterly periods, and the remaining months planned.
  2. Long-term planning is usually for a period of up to 10 years for some companies. It is applied in a small number of firms due to the high degree of uncertainty that makes the expected results difficult to predict.
  3. For control and feedback purposes, budgets must be systematically updated.
  4. Planning projections should be periodically reviewed and adjusted to the actual data, tracking changes in the conditions previously projected so that the projected outcome is as close as possible to the actual result.

Limitations of Planning

According to Welsh (1993), and Sanvicente and Saints (in 1994), there are limitations in any kind of planning. We highlight the following true statements:

  1. The estimates are based on estimations, subject to major and minor errors, depending on the sophistication of the estimation process.
  2. The plan, by itself, does not guarantee the projected outcome; it must continue to be monitored and adapted to circumstances.
  3. The cost of deploying and maintaining a planning system does not allow its full use by all companies.
  4. Delays in the issuance of data performed significantly hamper the implementation of adjustments in a timely manner.
  5. The difficulties of implementing adjustments generate distrust of projected results.