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Michele Collini's Blog
05/07/2022 Corporate Finance and Management Control

Planning, from tool to behavior

Planning, from tool to behavior

Planning should mean looking ahead and delimiting the scope where actions can take place.
Planning drives many entrepreneurs to change their management system and tackle the job by asking themselves in advance what needs to be done to achieve business goals.

Economic, financial budgets, however, are only good if they are used consistently, as a guide for business strategies. Thinking about it once a year does not help.
The budget should not be a “quick and easy forecast” but real business thinking with a planning of multiple objectives of a managerial nature that the company sets out to achieve in a given period.

Budgeting covers not only economic aspects, i.e., turnover and costs, but also financial, capital and organizational objectives.

Each aspect is linked to another. In fact, elaborating the turnover or purchasing budget also implies direct impacts in the financial aspect, corporate debt, and personnel utilization.

The budget is also important because it allows us to get, in advance, such key measurements as the prior division of fixed and variable costs, the Contribution Margin, the Break Even Point, and, with the break-even point analysis, to know in advance how much we need to bill to cover all fixed costs.

Planning is a matter of free choice, but it serves to control certain important parameters, mainly for the company itself, as well as for banks, as required by the new EBA guidelines and to find some measurements and indices for the New Crisis Code.

Let’s talk about it together
Michele Collini