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annual operating plan, key performance indicators, KPI, strategic plan

The Value of An Annual Operating Plan

What Is an Annual Operating Plan?

An annual operating, or operation plan will determine the financial, physical, and human resources goals that need to be achieved for your businesses short-term goals. It provides a framework for day-to-day operations, outlining the activities and targets that need to be carried out to achieve your aims and objectives.

As the name states, an annual operating plan covers a one-year period.  An annual operating plan should be at the top of a business owners list when it comes to things to have prepared. It can help to stay organized and determine goals. This plan should also be linked to your strategic plan to go hand in hand with the growth and business goals.

What is Included in An Annual Operating Plan?

Annual operating plans can help provide you with answers to key questions, such as who needs to be working on what, how should resources be allocated for tasks, what risks is the business currently facing, and how can these risks be mitigated. In essence, it’s a roadmap for operating your organization. Annual operating plans include the following:

  • Objectives
  • Activities
  • Desired outcomes
  • Quality standards
  • Staffing/resource requirements-
  • Timetables
  • Process for monitoring progress

Operational Plans and Budgets

An operational plan is a practical document which outlines the key activities and targets an organization will undertake during a period, usually one year.  It is often linked to funding agreements as well as being linked overall to the organization’s strategic plan since budgeting comes after planning. Once the organization figures out where they want to go in the future, budgeting will ensure you have the resources to get there. In a survey of more than 700 companies conducted by the IMA, the best performing companies clearly document their goals and how to achieve them before they start budgeting.

The operational plan will give a more accurate number than the strategic business plan to gauge the success of the strategic plan. It is important that the strategic and operational budget fall close in line with each other since the strategic plan should be supported by annual operational plans.

There is no point in having a very large-scale operational plan in place without the resources to deliver it.  The organization’s budget must be tracked carefully throughout the year to make sure that revenue and spending is on track to meet its goals and financial commitments.

How To Create An AOP

  1. Strategic Plan: You must have a strategic plan in place, as mentioned above. It is necessary as an annual plan includes tools to carry out the strategic plan.
  2. Identify goals: After goals are determined, develop the initiatives that the business will do to pursue them. Some examples of initiatives are quality control measures and faster delivery times.
  3. KPIs: KPIs, or Key Performance Indicators will be used to measure progress. It is best to focus of leading KPIs, predictive measures that will tell what to expect from the future, rather than “lagging” KPIs, which confirm a pattern that is already in progress. KPIs are a big part of the success of an operating plan and should be discussed with the team.
  4. Tracking System: It will be beneficial to put tracking system software or systems into place to track the KPIs accurately, such as a dashboard and consistent follow-up meetings.
  5. Communication: Communication truly is key. The KPIs should be discussed with the team so that everyone can put in the work to reach those goals and initiatives.

NOW CFO and Annual Operating Plans

NOW CFO has expertise in ensuring that businesses reach success, and beyond. Our consultants will make your business plan development a priority, ensuring that your annual operating plan is set up for a victory. You will rest easy knowing that your goals and measures to reach those goals are put it in place.

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