What Is the Difference Between a Financial Plan and an Operational Plan?

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An operational plan and financial plan work together to reach your goals.
An operational plan and financial plan work together to reach your goals. (Image: business plan 2 image by Kelly Young from Fotolia.com)

You have goals for your business. Now you need a road map for direction. An operational plan and a financial plan are elements of your business plan that support each other to move your business ahead in a chosen direction. The operational plan runs the business, whereas the financial plan is the bread and butter. The thought process behind the operational and financial plans allow you to develop a strategic business plan with continuous nurturing as your business grows.

Difference in Function

Operational and financial plans serve different purposes within a business plan. The operational plan explains the daily operations of the business such as its location, equipment, people, processes and surrounding environment. In an operational plan, your focus is on how and where your products and services are produced. It identifies your location requirements, business hours, personnel, inventory and suppliers. Your financial plan forecasts over a one year period sales, the cost of goods, expenses, and reflects your monthly profit and cash flow to determine if your working capital is adequate.

Difference in Plan Development

As the owner of your business, you develop the operational plan because you are aware of the processes of your business. Since operations are often interconnected, you may need to consult with management departments in the operations of your business. Your financial plan is initiated by your insights. You may need to consult with a financial professional to crunch the numbers and make recommendations in the development and implementation of your financial records.

Difference in Risk Reduction

The operational plan identifies internal risks to the business such as partnership risks or your production capability, and external risks such as political and economic influences. The operational plan outlines your strategy for risk reduction. The financial plan focuses on price outlook, historical data, inventory planning and identifies other risks which can affect your profits.

Difference in Growth Strategies

As your business grows, your financial and operation plans will change as well. If your operational plan is outdated, it will have an effect on your hiring, training and future directions. Similarly, growth requires storage space for new products, delivery mechanisms for new services, as well as new equipment, all of which require adjustments to the financial plan to reflect accurate cash flow.

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