An annual operating plan (AOP) is a document that displays an organization’s financial layout and resource allocation. The project is geared towards achieving particular goals in a year. Companies use annual operating plans to create daily frameworks to carry out objectives. It’s a future projection detailing resource allocation and possible risks in the execution process. But what does an annual operating plan contain?
Contents of an Annual Operating Plan
An annual operating plan contains particular items that are different from logistical plans. Here’s what to include in your AOP.
- Business activities
- Tracking Methods
The AOP you create might vary due to the content you include. However, as you build the plan, the elements above are a starting point, and you can contain or exclude items of interest.
How to make an annual operating plan?
Making an AOP is crucial for any business as it will help to minimize losses while ensuring good use of resources. For this reason, here’s a guide to help you.
- Roll out a plan and process – Crafting a repeatable process is one method of ensuring an entire project is in operation. With a starting point, your team will know the direction to take and what to do in the process. Ensure a strategic plan showing what you want to do and how to achieve it. Use an AOP to achieve the company goals in milestones.
- Identify important goals – Establish the goals your business must pursue. Begin with simple plans before focusing on more complex objectives, and use initiatives to pursue and achieve them. Potential initiatives include; shorter delivery times, improved security, and training employees to help achieve the set goals.
- Identify possible roadblocks – As you outline the process, identifying roadblocks that can hinder the AOP will help it work. Consider time constraints that can affect the planning process, hindering its success. Identifying inhibitors in the initial stages will help deal with them as needed while avoiding others.
- Select Key Performance Indicators (KPI) – Employ KPIs to measure progress. Ensure that you discuss the appropriate KPIs with your team before implementation so that you don’t take unhelpful measures.
- Develop tracking systems – Once you have KPIs, incorporate tracking methods like calendars, data dashboards, and meetings.
- Keep communication lines open – Let your team know that communication is the key to achieving the set objectives in the AOP. Working in unison is one way to guarantee that an organization is thriving and everyone’s input matters. Hold meetings to discuss the progress and inform the team on the following path to achieve the upcoming milestone.
The Difference Between an Annual Operating Plan and Budget
An annual plan isn’t the same as a budget because the latter deals with finances while the other is about merchandise planning. Once you set the two apart, the goals you have for the company might turn as over-ambitious or financially unrealistic. So, what’s the actual difference? AOP is a practical outline toward specific targets, and an annual budget ensures you have the resources to make the events a reality.
An effective annual operating plan is a sure way to grow your business by enforcing activities that help to achieve set goals. Ensure that the program you roll out is actual and resonates with your team while aligning with finances. Allocate enough time for each milestone and only move to the next when the previous is achieved.