Budgeting Basics and Beyond

2.3. Short-term Plans

Short-range plans are typically for one year (although some plans are for two years). The plans examine expected earnings, cash flow, and capital expenditures. Short-term plans may be for a period within one year, such as a month or week. Short-term planning relies primarily on internal information and details tactical objectives. It is structured, fixed, foreseeable, and continually determinable. The short-term profit plan is based on the strategic plan. It is concerned with existing products and markets.

There should be a short-term profit plan by area of responsibility (product, service, territory, division, department, project, function, and activity). Short -term plans usually are expressed on a departmental basis. They include sales, manufacturing, marketing, management (administration), research, and consolidation (integration) plans. Short -term planning has more lower-level managers involved in providing input. The line manager typically is involved with short-term rather than long-term plans. In making the short-term plan, the line manager should consider the company's objectives and targets outlined in its long-term plan. The manager's short-term plan must satisfy the long-term objectives of the company.