AOP and Budgeting

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Business Planning and Budgeting

Business planning is critical for every company. Often conducted as an annual exercise the business plan is the volume, cost and profit plan for the upcoming year. This is also referred to as the annual budgeting process.   

Some companies conduct this as part of the long-range forecasting process, which cover anywhere from three to seven years. The long-term forecasting is indispensable for companies with longer product development cycles. It provides the inputs for capacity planning and other long-term expansion initiatives.   

It is common knowledge that longer-term forecasts are more erroneous than short-term forecasts. There are more dynamic variables and error processes at play in determining the conditions expected to prevail in the future. So it is necessary to subject your forecast to a sensitivity analysis to understand the robustness of the forecast.  

Valtitude has developed a unique methodology to develop long-term forecasting and analyzing the forecast sensitivity.  

Often the annual Marketing Plan is the driver for the demand information in the annual budget. The Marketing Plan is developed with a volume forecast for the year along with the spend levels necessary to create and sustain the expected demand for the products. The process for Market share forecasting is explained here. Marketing-mix modeling is a key component of developing the Marketing Plan.  The Business Plan or the annual Budget often follows the following outline: 

  •  Capacity and other bottlenecks 
  • Organizational Consensus 
  • Revisions to Spend and volumes 
  • Management buy-in 
  • Internal Factors. 
  • Development of a Sales and Marketing Plan 
  • Calendar Monthly forecast 
  • Strategic analysis of external factors: 

- Economic 

- Political 

- Competitive 

  • Operating Budget 

- Manufacturing Costs 

- Administrative costs 

- Sales and Marketing Overheads  

Valtitude based in Boston MA, specializes in demand planning, S&OP, Sales Forecasting, and supply chain optimization.