It’s the final quarter of 2019 and plans for 2020 are being detailed right now. I had a great weekend in Riyadh working with a team on Business Planning. One of their requests was for plans which can offer a degree of certainty, which can be relied upon. One of our exercises involved planning the construction of a tower, then implementing the plan to actually build it using Lego bricks. This provided another example of the implementation not quite matching the plan.
Here is the news: it never does.
The only certainty in planning is that the actual will be different. The team in Riyadh know that now. Having established that – which we kind of acknowledge but never really commit to – we can get to the important element – it is not the difference of actual to plan which is important, but the action you take as a result. Sometimes you will need to start all over again (this happened with the Lego!), other times things will go better than expected. But at least with a plan you know where you want to be and have a way of deciding what to do next.
It was almost inevitable I suppose that my own reality did not match my plans – my flight home spent an additional 90 minutes on the tarmac having a bulb changed. I decided to do nothing about that, just accept that someone was working hard to ensure my safety and help to get me to where I then wanted to be.
Buzzwords of the Week – Balance Sheet
Definition – A snapshot of a company’s finances at a given point in time, including assets, liabilities and net value. The two parts must balance, i.e. they come to the same total, so the total assets will always equal the liabilities plus the “equity” – the bit due to shareholders. Balance Sheets are also called ‘statement of position’.
Alternate View – contains the only hard rule in finance: the balance sheet MUST balance. Essential for understanding the company’s financial situation, but it is only half the story, as it complements the job done by the Profit & Loss Account – or Income Statement, which shows money coming in and going out over a period of time, showing a video rather than the Balance Sheet’s snapshot.