A formal financial plan holds management accountable and protects a manager from capricious shifts in the co-op's strategic direction. Writing it down protects everyone. A formal financial plan tells the manager what is expected of him or her for the next one to five years and provides a means for a board to measure that Lnager's successes and failures in carrying out that plan. A formal written plan also provides some protection for the manager from being held to an ever changing set of expectations. A formal financial plan provides a means to test assumptions about the marketplace and store operations and to monitor those assumptions' validity over time.
Every business is affected by changes in both the macro and micro economic environment.
Shifting demographic patterns, local wage rates, a new bulk section in the local grocery store, changing store hours, major road construction, or dozens of other things can all have major effects on a co-op. By comparing your assumptions day by day, month by month, and year by year, not only do you find out what you need to know. You also get the information when you need to know it, that is, when the information can actually do you some good. At a minimum, adequate financial planning includes an annual income statement budget with all important categories of sales, margins and expenses, margins detailed and compared with actual figures month by month and year to date. A more complete exercise includes projecting cash flow, balance sheets, and capital needs as well.