6 steps to prepare your Business plan and Budget for 2021

The current unprecedented health and economic crisis pose a challenge to many companies to make reasonable forecasts for their business in the next 2021.
At the same time, the planning process, especially in times of crisis, is crucial and has a decisive role in evaluating the organization.


Successful business planning is a prerequisite for:

  • Effective cash flow management and monitoring
  • Setting clear goals
  • Tracking results
  • Timely taking corrective actions in case of deviations from the business plan
  • Optimization of activities/ staff/ workload in accordance with set goals
  • Change of business expectations
  • Directing and motivating the team and building accountability in the company in connection with the implementation of objectives.


In this article, we have prepared 6 effective steps to successfully structure business planning to deal with the economic crisis in 2021.

1. State your goals

Start by establishing clear and quantifiable goals for your company to make sure you and your management team are aligned on the direction your company is headed. Keep in mind the adage “Without a plan, all activity looks like progress”. 

State your objectives on a company level in terms of:

  • growth/survival strategy,
  • key products/markets plots,
  • R&D goals,
  • customer acquisition and retention approach and targets,
  • profitability/breakeven objectives,
  • optimization opportunities,
  • contingencies/pivots.

Synchronize those objectives with the key management groups in each department to make sure you account for any potential problems on operational level.


2. Quantify your strategy

Prepare a business financial forecast, outlining the established goals and taking into account а) historic data and b) industry trends assumptions.

Set KPIs for each department in line with the forecast. 

Make sure you incorporate past knowledge of the industry and business but do not rely on it as a universal guiding point. Revaluate any numbers that are expected to be transformed given the current economic downturn. 

Review the forecast and make sure you match resources with strategy. Planning for growth, new products/services developments, pivots, and modified customer acquisition mechanisms require a clear picture of the resources involved. Verify that your goals are consistent with the respective cost centers so that you secure the financial and operational viability of your forecast. 

Pay special attention to the cash position of the company, ensuring that your cash flows can support the next 12 months of operations. Calculate expected cash outflows and inflows, taking into account the forecasts, usual payment terms with clients and suppliers, inventory levels, and required working capital. Review potential cash deficit treats and secure a plan to avoid cash gaps, by planning the cash flows ahead. 


3. Apply “What if” analysis 

Incorporate in your forecast scenarios to provide an overview of your business dynamics depending on the changing environment. In that way, executives can determine which moves might be pursued contingent on a set of different assumptions. 

Some companies are rethinking their M&A strategies and pursuing acquisitions, partnerships, or divestitures. Others need to manage their costs carefully to reflect the current industry developments, i.e. increasing costs upon signs of upheaval or reducing expenses in case of further contractions. Companies in more stable industries are looking at launching new products and investing in new technologies for post-Covid times. 

In any case, by applying scenario analysis in your plan you will form an expectation of your business outlook and therefore be prepared to counter uncertainty and take timely actions depending on the different outcomes

Comparing actual results to the forecasted scenarios will provide you with a justified base for monthly performance discussions that are focused on creating value and impact. 


4. Align your reporting 

Identify the financial insights required to inform your decisions en route to achieving your goals, including regular comparisons to budget. Make sure you receive timely and reliable data in line with the KPIs you need to track. 

Regular reporting brings about:

  • results-oriented data to support executive decisions
  • red flags for financially unsustainable operations
  • deviations from KPIs and forecasts
  • confidence before partners and investors in the numbers behind the business.

Do not compromise on reporting to make sure you make justified and informed decisions. 

Keep in mind: You can only improve what you can measure! 


5. Use your budget!

Do not prepare a budget to present before partners and investors with the intention to archive it by the end of January. Use it!  

The budget is a tool for the management to analyze the actual company’s performance as compared to the initial plan and take timely measures. Be ahead of your competitors by applying data-driven insights to your decisions and being able to identify trends. React timely and on the spot to capture immediate benefits or counter coming treats.  


6. Communicate 

Empower your team by sharing your vision and strategy for the next year. Communicate with your colleagues the goals for the company as well as each team member’s respective role in achieving them. In times of crisis, it is easy for the team to lose confidence, motivation, and direction. 

As an executive, your role is even more difficult - to keep the company running while simultaneously taking care of the morale in the organization. 

Well, the annual planning is a good opportunity to combine the two. Make sure you communicate with your team the way forward and illustrate their contribution. You might be surprised by the unexploited potential of your human resource once they feel personally involved.  


How to make it happen

You are excited by the concept of taking control of the future of your company? Business planning and budgeting is the first step on this challenging road. 

This process might be trouble-free for one but challenging for another. 

If you believe in its value, but are concerned that your current financial management workforce capabilities might need support, consider outsourcing. 


Leaning on CFO Insights will ensure you receive on-demand C-level financial management and financial expertise that evolves with your changing needs and opportunities and provides the long-term support you require.

Contact us: office@insightscfo.com

    0885 29 69 76