Every entrepreneur should know that business planning is a continuing process – it is not just something you prepare for the bank manager at the start of the year, and then throw it away and forget all about it Most business plans are updated every year. For most small firms, it is unrealistic to prepare budgets and cash flow forecasts for more than a year ahead, and less than a year would be too short to generate useful information . Some firms revise their plans at the half year stage if some major changes are going to happen. Plans need to be monitored periodically if they are to be of any productive use. Budget outcomes should be compared with forecast figures at least once each month, and then within two weeks of the end of the month. This will enable prompt identification of any major discrepancies or problems which lie on the horizon.
When inconsistency occur they must be questioned: why has this happened? Is it a one-off occurrence, or the start of a
longer-term trend and potential problem? What has to be done to solve the situation? Unfortunately, too many people faced
with apparent problems are more concerned with asking ‘Who is to blame?’ rather than identifying the cause of the problems
and working to find a solution. One other aspect which must be considered here is the fundamentally different approach to planning by small firms compared with their big-company counterparts. Larger organizations have the resources, stability, and security to facilitate
the luxury of long-term strategic planning, perhaps three to five years ahead or possibly more, and the immediate year ahead is seen as the short term. For the owner-managers of small firms, the immediate problem is often simply one of survival – where is the next order coming from? – particularly
in the early stages of development of the business, when planning even one year ahead counts as long term. Small firms are
essentially focused on short-term plans and goals with survival as the first priority. Consequently, they look to the equally short-term policies that will enable them to meet the short term goals. Only when they have achieved some measure of stability and security can they start to look at longer-term planning and investment.