Budgeting & Long-Range Planning

It's Time To Listen to What Your Budget Can Tell You

As a business owner you may be challenged with identifying the best plan for your business structure.  When it comes to budgeting, let's be clear that it is different when compared to a long-range planning.  One important difference is the time period involved.  The maximum length of a budget is usually a year, and budgets are often prepared for shorter periods of time, such as a month or a quarter.  In contrast, long-range planning usually encompasses a period of at least five years.

A second significant difference is in emphasis.  Budgeting focuses on achieving specific short-term goals, such as meeting annual profit objectives.  Long-range planning, on the other hand, identifies long-term goals, selects strategies to achieve those goals, and develops policies and plans to implement the strategies.  To choose a strategy that will work best for your business starts with being realistic as possible.  A budget can be used to indicate some of the following:

• ​Your cost of operations
• A realistic estimate of profits
• For a new business, a total of start-up cost
• The revenues necessary to support the business

If you're missing the targets set out in your budget, you can use the budget to troubleshoot by figuring out how you can reduce expenses like labor or new computers, increase sales by more aggressive marketing, or lowering your profit expectations.

The final difference between budgeting and long-range planning relates to the amount of detail presented.  Budgets, can be very detailed.  Long-range plans contain considerably less detail.  The primary objective of long-range planning is to develop the best strategy to maximize the company's performance over an extended future period.  

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