Lesson-4. Importance of planning, budgeting, monitoring, evaluation and follow up in running an enterprise
Planning is an essential step to achieve success in any programme. Planning for an enterprise, can be considered as a primary preparation to initiate new venture and its development.
It has been observed that a lot of business plans fail in achieving desirable goals because of poor planning. Of course, no such model of planning exists that can guarantee the success of new venture. Recent studies, however, indicate that there are obvious similarities amongst the key groundwork planning that most successful entrepreneurs accomplish before they set up their new ventures. The planning should be in such a way that it should not only provide a good start to new venture but should maintain the same success throughout for a long time. Every determined individual should approach to get good result, examine own abilities and limitations, make an advance insight of problems that may come, decide whether a planned venture can be anticipated to be successful and grow in the long run; and, finally, if assured, carefully plan the course of conduct of related activities necessary to sustainable progress. Thus, business planning is regarded as essential to a superior start in entrepreneurial career.
4.2 PROJECT PLAN – A BASIC DOCUMENT
A project plan spells out the main features and the future prospects of a planned business. Besides, it provides insights into vital issues that are to be attended to and sorted out to achieving the ultimate goal. Some suggest that a project plan is a well defined written document, based on significant facts, records and estimates. It portrays by and large description of a business proposal, attempts to justify its technical practicability as well as commercial accomplishment. Project Plan-Benefits and Utilities:
A project plan is quite a useful tool to bring greater success in attaining objectives of a business. Some of the major benefits and utilities are:
• Highlights basic elements. A project plan lays stress on the basic elements generally in about every business. The basic elements include ownership, business locality, purpose, policies and strategies, resource necessities, budget estimates, and probable ways and means to carry out goals.
• Deals with decisive issues. A decision should be taken whether to go for a particular business or not. More importantly, a project plan justifies the individual capability and aptitude to mobilize resources available.
• Assists in evaluation. A project plan helps in evaluating by and large merit of an innovative business thought.
• Serves to gain support. A project plan certainly helps in looking for and acquiring required monetary assistance from external sources.
• Helps timely implementation. A project plan document works as a manual to be followed in the procedure of organizing, directing, coordinating and controlling planned activities designed at ensuring well-timed accomplishment of objectives.
• Facilitates registration. A project plan is important for seeking permission to engage in a business from a competent authority. Both permission and registration through competent authorities are quite necessary to initiate and carry out any business activity and to seek monetary support from commercial banks.
• Prepares groundwork. Project planning is one of the critical elementary tasks necessary to make ready the groundwork for a new large or small venture, and seldom for expansion, diversification of an existing unit.
4.3 IMPORTANCE OF BUDGETING
A budget is generally a statement of probable outcome during a designated time period. It is expressed in financial terms – as revenue, expenditure and capital budgets and in non financial terms – as in budgets of direct labour hours, materials, physical sales volume or units of manufacture. Budgeting is a key managerial procedure because it constitutes functions of planning, controlling and coordinating. The principal objective of budget is to guarantee the best possible utilization of available funds for the purpose of producing at lowest cost and selling in a competitive market at highest profit. George R. Terry has described budget as “an estimate of future needs, arranged according to an orderly basis, covering some or all the activities of an enterprise for a definite period of time.” Thus, a budget constitutes an avowal of planned or anticipated results in terms of quantity for a specific future period. In simple words a budget is a statement of anticipated outcome expressed in statistical terms.
The purpose or importance of budgeting:
• To plan for the efficient and smooth running of an enterprise.
• To sustain the manufacture schedule
• To coordinate the various activities of an enterprise.
• To cause control on various departments.
• To help in decentralization
• To help in allocation of authority
• To plan and manage receipts and expenditure.
• To manage the expansion.
• To arrange the funds.
• To control the research projects
• To set up principles of evaluation.
• To help the organization in its counteractive action.
The budgets are classified into different types such as revenue and expense budgets, sales budget, production budget, production cost budget, and selling and distribution cost budget, capital expenditure budget, cash budget and master budget. The budget coordinates production, sales and finance.
Budgetary control is important to plan, carryout and control the operations of the business. The entrepreneur finds it quite useful in planning the development of his business. “Budgetary control is a device or technique of managerial control through budgets.” George R. Terry has described budgetary control as ‘a process of finding out what is being done and comparing the actual results with the corresponding budget data in order to approve accomplishments or to remedy differences by either adjusting the budget estimates or correcting the cause of difference.’ The process of budgetary control includes planning, coordination, recording, control, appraisal and follow up various activities planned and implemented based on budgets. Budgetary control provides a platform for managerial control, direction of sales effort, production planning and control over stocks.
4.4 MONITORING AND EVALUATION OF AN ENTERPRISE
Monitoring and evaluation provides learning from past experience. It motivates the company to improving service delivery, planning and allocating capital and demonstrating results as part of responsibility to key stakeholders. Though evaluation is distinguished from monitoring, they are in fact mutually dependent. Monitoring presents what has been delivered and evaluation answers the question “what has happened as a result of the intervention?” Impact evaluation means particular aspect of evaluation that focuses on the ultimate benefits of an intervention.
Monitoring: It is standard methodical collection and analysis of information to track the development of programme accomplishment against predetermined targets and objectives. It relates to keep a cautious check of project activities over a period of time. Each project needs advanced proposals and objectives. Monitoring system should work out to keep watch on all the activities, including finances. This will let the project staff to know how things are going, as well as giving early warning of probable problems and difficulties. Monitoring should be done while a project is being implemented to improving the project design. It provides information on where a project is at any given time with respect to targets and outcomes. Moreover, it focuses particularly on efficiency, and the use of resources. It does help in clarifying the objectives of the programme .It links activities and their resources to objectives. Monitoring converts objectives into performance indicators and sets targets. It regularly collects data on these indicators and compares actual results with targets. With its help reports regarding the progress can be passed on to the managers and alert them to about any forthcoming problem.
Evaluation: It is an objective appraisal of an ongoing or recently finished project, programme or policy, its design, implementation and results. Evaluation deals with questions of cause and effect. It assesses the value, worth or impact of an intervention and is characteristically done on an episodic basis. Generally, it is done annually or at the end of the phase of a project or programme. An evaluation studies the outcome of a project with the aim of informing the design of future projects. Evaluation looks at the significance, efficiency, and sustainability of an intervention. It provides evidence of why targets and outcomes are or are not being achieved and addresses issues of causality. Evaluation analyzes why planned results were or were not achieved. It assesses specific casual contributions of activities to results. Evaluation examines implementation process. It explores unintentional results. Evaluation provides lessons, highlights significant accomplishments or programme potential and offers recommendations for expansion.
- Seeks to capture and isolate the outcomes that are caused by the programme
- ReviewS all previous Monitoring &Evaluation activities, processes, reports and analysis
- Provides a thorough understanding of the various causal relationships and the mechanisms through which they operate
- May seek to manufacture, compare, contrast a range of interventions in a region, timeframe, sector or reform area
The reasons to undertake M&E
Monitoring and evaluating an enterprise enables to improve the management of the outputs which will have the greatest impact. M&E plays an important role in keeping projects on track, create the base for reassessing priorities and create an evidence base for existing and future projects through the logical collection and analysis of information on the implementation of a project. M&E during project implementation perform two main functions
• M&E as a legitimization function - PROVING
Do we achieve the desired benefits for the right target groups?
Do we achieve these benefits as efficiently and effectively as we can?
• M&E as learning function - IMPROVING
DO we do thing correctly?
Could we do things better?
IMPORTANCE OF MONITORING AND EVALUATION
1. Offer invariable feedback to improve customer’s service.
2. Recognize potential problems as early as possible and propose probable solutions.
3. Observe the user-friendliness of the project to all sectors of the target population.
4. Observe the effectiveness with which the different components of the project are being implemented and propose steps for improvements.
5. Evaluate possibilities up to which the project is able to achieve its general objectives.
6. Provide guiding principles for the setting up of future projects.
7. Try to improve project design.
8. Consider views of stakeholders.
10. Show necessity for mid-course corrections. Reliable information allows managers to keep track of progress and regulate operations accordingly.
4.5 FOLLOW UP
Follow-up does not require being expensive. It can be easily achieved through phone and email. Follow-up relates with responding to business queries, inquiries, and complaints if your business is relatively new. Many businesses fail soon after they are launched only because they didn’t propose good consumer support along with their products and services. Every consumer has distinctive requirements and as a smart entrepreneur, it’s your duty to find out the expectations of consumers from your products as well as your company. The consumers are not satisfied merely with the quality of your product but they also want proper after sale treatment that will maintain longtime relations between your company and consumers. Contented and satisfied customers are your biggest asset. They are the ones that promote your business in incredible ways by referring your products and services to others in their social circle. They not only provide you the feedback regarding your products but also help directly or indirectly in making your products more popular. Your reputation is the gift of your customers.
Anil Kumar, S., Poornima, S.C., Mini, K., Abraham and Jayashree, K. 2003.Entrepreneurship Development, New Age International Publishers, New Delhi.
Gupta, C.B. 2001. Management. Theory and Practice. Sultan Chand and Sons, New Delhi.
Ind.u Grover. 2008. Handbook on Empowerment and Entrepreneurship. Agrotech Public Academy, Udaipur.