The Difference Between an Operating Budget & the Strategic Plan

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A business plan incorporates both strategic planning and an operating budget.
A business plan incorporates both strategic planning and an operating budget. (Image: Jupiterimages/Comstock/Getty Images)

Strategic planning is a process of envisioning and articulating a company's long-term goals in order to provide a focus for day-to-day operations. An operating budget is a business financial plan covering a specific period showing how the company will use available funds and how it will financially implement its objectives.

Strategic Planning

Strategic planning is a long-term process of creating a company according to a broad vision that organizes and provides a unifying thread for company activities. A company may set out to become a leader in its field or to improve the lives of customers suffering from a particular type of disability. Its strategic plan will provide a direction towards these goals by outlining a path towards creating distinctive and vital products or providing services specifically tailored to its target market.

Operating Budget

An operating budget is a practical tool geared towards day-to-day financial management. A company's operating budget expresses its limitations and its possibilities based on real world information and projections about business operations and operating expenses. Business revenue and expenses are unpredictable and few companies are able to follow their operating budgets to the letter, but the process of researching costs and making projections forces an entrepreneur to make difficult choices and create realistic plans.

Business Plan

A business plan is a bridge between a strategic plan and an operating budget, and should include information about both elements of a business enterprise. Its executive summary should encapsulate the strategic plan and also explain how the company will implement this plan via the specifics described in the plan. It should also include an operating budget to demonstrate the details of how the company will turn its strategic plan into a reality. By aligning the operating budget with the strategic plan, a business plan ensures that a company will not only be successful financially, but strategically as well.

Comparison

Strategic planning is a long-term process, usually addressing issues relevant to a time frame of at least a year. An operating budget tends to cover a shorter period of time, such as less than a year. A strategic plan tends to deal in generalities while an operating budget must be specific about what money will be coming in and how it will be spent. A strategic plan that disregards the importance of an operating budget may be nothing more than a quixotic rant, while an operating budget not aligned with a company's strategic plan may meet short-term goals at the expense of long-term objectives.

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