Planning or budgeting is a forgotten managing tool in Macedonia. The elder generations here will remember that the big Macedonian companies from the previous system had special departments for planning and analyzing. With the breakdown of this system, one of the first things from which we gave up was these departments. Wasn’t planning prevalent anymore?
In the last 25 years, the companies that have up-to-date functioning budget are rare. And companies who stick to planning as a primary document for working are even less. Mostly the companies that are a part of greater regional or global stories are obligated to plan and to follow their budgeting. Fortunately, the engagement for planning slowly rises in even more Macedonian businessman. This trend will continue in the future as well…
Should I make a budget for my company? This question is proposed by the managers, and this is where the deal stops. As soon as a conversation for planning is being opened, the managers in the region would immediately state that we live in an unforeseen environment which is the reason for their lack of planning. They make excuses based on unpredictable political situations which affect their business a great deal… And in reality, they are correct! But, this isn’t a reason for not making a working plan, for not defining the targets, for not calculating the costs and to follow them as well. All the markets are unpredictable. There is no such thing as predictable market, only risks and challenges differ by country.
But, why is planning important What will I accomplish by having budget for my company? I believe that these are the real questions. First, we need to understand the benefits from an annual business plan:
1. Base to follow KPI of the employees
Owners of small and medium companies have a real problem in making a transition in managing the company. Is the company going to be taken over a family member or a professional manager – the problem will stay the same. If they don’t trust the skills of the new manager, they will always be the main voice regarding the decisions, which will impede them from making the transition. To have a successful transition, they must propose a criterion for success, which is done by budgeting. Following the execution of budget will become their new task. Instead of being a part of some operative decision, they would dedicate themselves in following the parameters of the company. Comparing the planned and the accomplished are a true level of success.
The problem with middle management is the same. The lack of measuring the results, of success, is present here as well. And again, the cure is the same: integrated mechanism for planning and following the budget, gives a perfect insight in the Key Performance Index of managers and other employees. Motivation of managers could be defined by these kinds of plans, and discussions in the company will gain a much different, real track.
2. Healthy working environment in the company
For sure, you are wondering how the budget is related to a healthy working environment in a company. The answer is simple. As long as a company doesn’t have a plan nor a target, the conversations going on there are based on assumptions only. Here the speakers are outwitting one another. Everyone has the right to be mad at the results, or think that they work in the best way possible. Best effort is the principle which the teammates obey, although it might not be always successful. Instead of rewarding the engagement, a company may pass on to rewarding the results. Then, the unprecedented conversations in the company will turn into conversations for the accomplished results.
This process is not simple. In the begging every company has repulse. But, of course, it will be replaced with valuable results.
3. Better negotiating power with potential investors
How to gain an investor, when you don’t have exact targets yourself. A company can’t negotiate successfully if, besides the results from the past, it doesn’t have a clear picture and numbers for the future. That’s why having a budget and caring intern procedures for plan and analysis is one of the main theories for gaining a new investor, and receiving a fair bid.
Companies which are opting for a new investor are making the budget when the investor knocks on their door. But, that is too late. A great opportunity can be easily lost if the homework is not written on time.
4. Positive aspect of growth in the company
After the company sets a criterion for grading the success, after knowing the exact goal of the company and of the important players in the team, it will start showing up better efficiency and effectiveness. Results don’t show up on their own. But, if you haven’t defined the position of each part, the growth of the company is slowed down and chaotic. Budgeting, personal targeting of people, continually following the achieved results, and valuing them will provide growth for the company.
A company’s expansion sometimes comes from positive external factors. But, the potential growth from the unused internal resources should not be dismissed. Acknowledging the potential of the company, the resources from which it benefits, allows growth even when there is lack of positive external impact. A good defined target is, for sure, the first step.
5. Real picture of the company’s position
Managers often say they know their company thoroughly. Commonly, this is close to truth, because if they founded the company, probably they know it’s secrets. But, is this a real picture, a picture which is shared among all of the employees? Frequently this is not the case, which is why the companies are losing staff that could improve the growth of the company. The expectations and the real results are often different from one another, which results in disappointment – regardless if the outcome is good or bad. That’s why companies need a real picture of the situation. A picture that is shared among everyone and pushed forward for even better results.
As long as there are different perspectives for the basic things inside the company, a lot of conflicts will surface. These are problems which companies can solve. Just a little effort is needed to gain a better realistic picture.
These 5 reasons alone are enough to occupy the companies for preparing their budget for 2017. The team at InCom has accumulated experience and knowledge that could help you in this process. One of the important packs of services that we offer on the market is the pack for creating a budget, with the help of tools along which the results of the work can be followed.
The team at InCom is expecting you, to create the first budget of your company.