The financial planning model encompasses the ability to predict both revenue and profit. Few would argue that there is a need to have good financial forecasts, but many organizations do not practice the obvious. Family-owned businesses seem to be the worst, but surprisingly, even some publicly held businesses still have very poor financial planning models in place. The excuses are always the same: You don t understand our business; the environment is always changing and it is impossible to predict exact spending and revenue. Many of these businesses follow a plan that the finance people developed last October during the budget process. They then measure against this plan all year long. The accountants usually have their divine vision sometime around the 15th of October and come down from the mountain to communicate the requirements for profit and revenue to the rest of the organization, usually by Halloween. Within a couple volleys, a plan is agreed upon with little real process strategy linked to it. Frequently there is little linkage back to the strategic plan during this budget exercise.

Even more questionable are the bottom-up budgets that theoretically start from scratch each time. In many of these efforts, the result is the same: a budget that rolls up to a number that is acceptable to the stakeholders. The underlying assumptions of revenue growth at this time do not always get the scrutiny deserved. The result is a plan with little chance of accuracy. Accuracy of plans is dependent on...