Flashcards in Operational Plans Deck (33):
What is the definition of planning with regard to a business?
Planning is the process of deciding in advance what is to be done and how. A plan is a premeditated course of action- it involves selecting objectives and developing policies, programmes and procedures for achieving these objectives.
What types of plans do businesses use to help develop and run their operations?
- Strategic Plans
- Operational Plans
What is a Strategic Plan?
What is an Operational Plan?
What is a Financial Plan?
- Strategic Planning generally applies to an entire organisation and helps to establish the businesses overall objectives. They also seek to position the organisation in terms of its environment, over an extended time period.
- An Operational Plan is tends to cover a shorter period of time. They specify the details of how the overall objectives are to be achieved and incorporates processes for checking that the organisations plans are on track. They can also indicate where changes need to be made to strategic plans.
- Are the monetary quantification of the strategic and operational business plans
What characteristics must the ‘business plan’ of a loss adjusting practice include?
- It must involve the ‘Future’
- It must involve ‘Action’
- It must show how ‘Deviations’ from the plan will be handled
What do business plans help loss adjusting organisations to do?
- Analyse the WORTH and attainability of goals and objectives
- Develop strategies for ACHIEVING those goals and objectives
- Identify ways of MONITORING the achievements of those goals and objectives
- Develop strategies for handling DEVIATION from the plan
PROMPT- Wow we WAMD the business plan
What are some aspects of a changing environment?
- Shrinking markets
- Overall economic activity
- The nature of competition
- Social norms and attitudes, such as consumerism, which have resulted in an increased awareness of consumer rights
- Climatic and other catastrophes
Why is it vital to plan your loss adjusting business?
Planning ensures you-
- Clearly define your goals and how you are going to achieve them
- Identify your clients
- Identify your products and services
- Develop and examine your business carefully to ensure its viability
- Understand your businesses strengths and weaknesses
PROMPT- So that you can buy a CIIDU jetski
The planning process of a business includes 4x main activities. What are these activities?
- ESTABLISH overall objectives for the organisation, and formulate specific business goals- The strategic plan
- DEVELOP operational objectives- The operational plan
- DEVELOP a budget- The financial plan
- ESTABLISH a method of monitoring and evaluating the business plan
Prompt- EDDE is a man with 3x plans
What is the purpose of a SW0T analysis?
A SWOT analysis is used to analyse whether a business has the resources and skills required to be successful. This involves assessing the internal situation that exists in a business and the external situation that exists in the marketplace.
What does the anagram SWOT stand for?
- Strengths- The things your business is good at that will create a competitive advantage
- Weaknesses- The things your business is not good at that might have a negative affect on your business
- Opportunities- Opportunities your business can take advantage of
- Threats- Threats your business needs to take into account
What is the purpose of assessing the ‘internal environment’?
Assessing the internal environment will show your strengths and weaknesses, it will also show whether you have the potential to meet your business objectives.The key items to be assessed are knowledge, skills and resources.
What is the purpose of assessing the ‘external environment’?
Assessing the external business climate will show you whether there are commercial opportunities for your business and any threats that may exist or be emerging in the marketplace. Each external factor outside your business can be seen as either a threat or an opportunity.
What is an important aspect of ‘assessing the external environment’, and why is it important?
An important factor is market research. This is important because it provides you with the following information-
- Who your customers are
- Where they are
- Why they are buying the products or services
- Who your competitors are
PROMPT- WHO, WHERE, WHY & WHO
Market research on the external environment can provide information on what?
INDUSTRY- An industry is a collection of businesses that sell the same products and services.
COMPETITORS- The competitors of a business are those companies that are aimed at the same target market as your business and have the potential to lure away your customers or potential customers.
POLITICAL ENVIRONMENT- The political environment and the legal and regulatory factors of a company that have an impact on the way business is run.
ECONOMIC CONDITIONS- The state of the economy can have a significant impact on business. Generally growing economies have a positive affect on business while depressed economies have a negative impact.
SOCIAL TRENDS -Social trends such as consumerism can affect the way insurers consider claims, such as where a particular decision may attract adverse publicity.
TECHNOLOGICAL DEVELOPMENTS- New technology can improve the services offered to customers.
What is the definition of a mission statement?
A mission statement is a statement of why you are in business, including the purpose of your business and what it aims to achieve.
What information should a mission statement provide?
- The vision of the business
- Catchment area
- Target market
- The industry in which the business will operate
- What can improve the business
If they are to be useful, operational objectives must- what?
- Indicate clearly how the mission can be achieved
- Have realistic timeframes
- Include ways in which their achievement can be measured
- Be realistically based on the outcomes of the swot analysis and market research
What are the two basic elements involved in financial budgeting?
1- To express the future financial plans of the business as a monetary value
2- To compare the actual financial results of the business with the original budgeted estimates. Any significant differences point to the need for corrective action.
Name two types of budgets?
1- Operating budget- Projects income and overheads over varying times spans.
2- Financial (cash flow) budget- Concerned with the cash received and cash paid.
Identify the 4x key stages of creating an operating budget?
1- Create the fee income forecast(fee income budget)
2- Assess the work required to meet the fee income forecast
3- Calculate the overheads required to meet the fee income forecast
4- Create the income and expense budget (projected income and expenditure)
What information is the income forecast based on?
- The previous years figures
- Desired figures
What are the various approaches that can be used to create the income forecast?
- A ‘bottom-up‘ approach- An estimation based on the judgement of the loss adjusting staff.
- A ‘top-down‘ approach- An estimation based on the desires of the chief executive and management team.
- An ‘analysis’ approach- An estimation that takes into account the economic outlook, estimates for the industry, last year’s fee income and any changed circumstances within the company.
What is the main purpose of assessing the work required to meet the fee income forecast?
This stage ensures that there is a sufficient workforce in place to meet the required fee income forecast.
When calculating the overheads required to meet the fee income forecast, what overheads should be included in this budget?
- Salaries of all staff and related costs- eg- superannuation, etc
- Office costs- eg- Rent, maintenance, telephone, etc
- Other running costs- eg- Vehicles, equipment, advertising, etc
- Other costs- Such as taxation
- Procurement costs- e.g.- Public relations, entertainment, etc
Discuss the income and expense budget?
The income and expenditure budget is the projected profit and loss statement for the period being budgeted. It is concerned with what is receivable and payable. The income and expense budget shows all money estimated to be earned and spent, including interest and depreciation.
Why must business performance be monitored and evaluated?
- To ‘ control’ the business plan
- To take corrective action to rectify the situation that has led to a failure to achieve the budget targets
Discuss- Controlling business plans?
Control is the process that measures current performance and guides it towards a predetermined goal. The essence of control lies in checking existing actions against desired results determined in the business plan.
What are the essential elements of any control system?
- Predetermined criteria such as a goal, plan or yardstick
- Means of measuring current activity such as with records and reports
- Means of comparing current activity with a criterion
- Means of adjusting the current activity so as to achieve the desired result, such as making corrections
What is MIS?
Management information systems.
What kind of information should a management information system provide?
- Actual performance
- Deviations between actual and budgeted performance and the causes
A management information system should utilise a flexible reporting structure so that it can generate what types of information?
- Detailed data specific to the needs of individual operational managers
- Summary of information for higher levels of management and for external financial reporting
- Individual reports on the income, costs and profitability of each portfolio
- Combined reports to produce summaries of the profitability of a particular client, group of clients, industry sector or product
- An overall company wide summary
What basic errors face loss adjusting management when considering corrective action?
- Taking action when the circumstances suggest that none was needed
- Failing to take action when the circumstances reveal some corrective action was needed