#040 Business Planning 💼
Updated: Jun 26, 2022
Hello folks 👋
This is post number 40! I like a good round number!
In this post, we are covering the Business Planning competency. If you are interested in one day taking a management role within the business, the contents of this competency are useful to understand. Generally, as QSs we focus on the technical side, but if you ever wanted to set up your own business or indeed delve into the operations of the firm you work for you need to understand the concept of business planning. This subject matter is also useful for some client work where you support the client with identifying their goals and objectives!
I would highly advise you to go through the candidate guide and the QS pathway guide to understand the basic requirements.
DISCLAIMER: The following is not an exhaustive set of notes, but it's an attempt to help those who, like me at the beginning, did not know where to start! Please feel free to let me know if I have said anything incorrect or out of date!
So what is Level 1 Business Planning all about?
The RICS note that to demonstrate competence at Level 1, you need to demonstrate your ability to:
Demonstrate knowledge and understanding of how business planning activities contribute to the achievement of corporate objectives.
Types of business plan, e.g. strategic, departmental, operational, corporate
A business plan is a guide that defines objectives and details the steps to take to achieve a particular business goal. Business plans are used throughout the growth of a company from its startup to its expansion to provide a path to success. There are many different types!
A strategic plan is generally used for internal purposes as a foundational plan for the entire business.
An operational plan focuses on mapping out the day to day operation activities a business needs to complete to achieve tactical goals as part of the strategic plan.
Although used interchangeably, a corporate plan typically includes strategic planning content, but also tactical or operational plans and budgeting. A strategic plan is therefore a sub-set of corporate planning.
A departmental plan is an individual strategy for a specific department within a business. It’s a micro-level report which identifies the performance, failings and requirements for that department.
The essential elements of a business plan
This is a fairly straightforward bullet point, have a look at this link to understand what a business plan looks like.
An organisational structure is a system that outlines how certain activities are directed in order to achieve the goals of an organization. These activities can include rules, roles, and responsibilities.
The organisational structure also determines how information flows between levels within the company. For example, in a centralized structure, decisions flow from the top down, while in a decentralized structure, decision-making power is distributed among various levels of the organisation.
Here’s a link which describes some of the main org structures.
Methods for financial benchmarking (e.g. key financial ratios)
Financial analysis involves using financial data to assess a company’s performance and make recommendations about how it can improve going forward.
Meaning of working capital, stock, debtors and creditors
Working capital: this is a financial metric that is the difference between a company’s current assets and current liabilities. As a financial metric, working capital helps plan for future needs and ensure the company has enough cash and cash equivalents to meet short-term obligations such as unpaid taxes and short-term debt. More info here.
Stock: is any item stored by a business for use in production or sales
Debtors: This is a company or individual who owes money to a lender and is also often referred to as a borrower.
Creditors: are individuals, people, or other entities (i.e., organisations, government bodies, etc.) that are owed money because they have provided goods or services or loaned money to another entity.
See blog post #039 Accounting principles and procedures!
Cash accounting reports revenues and expenses as they are received and paid through cash inflows and outflows; accrual accounting reports them as they are earned and incurred through sales and purchases on credit and by using accounts receivable & accounts payable. Generally accepted accounting principles (GAAP) require accrual accounting.
Business forecasting refers to the tools and techniques used to predict developments in business, such as sales, expenditures, and profits. The purpose of business forecasting is to develop better strategies based on these informed predictions.
Planning to meet corporate objectives
A corporate plan sets out the actions required, and identifies the resources available, to deliver the stated aims and objectives. The corporate plan is an important document that will help you continually monitor finances and liabilities, identify opportunities and control your internal systems and structures.
That’s it for this post folks - as always if you have any questions drop me a message!