Ko zé, J. G.
A icle
Meaning ul manage ial ac ion planning: The inancial
componen
Sou h A ican Jou nal o Business Managemen
P o ided in Coope a ion wi h:
Uni e si y o S ellenbosch Business School (USB), Bell ille, Sou h A ica
Sugges ed Ci a ion: Ko zé, J. G. (1983) : Meaning ul manage ial ac ion planning: The inancial
componen , Sou h A ican Jou nal o Business Managemen , ISSN 2078-5976, A ican Online
Scien i ic In o ma ion Sys ems (AOSIS), Cape Town, Vol. 14, Iss. 4, pp. 156-160,
h ps://doi.o g/10.4102/sajbm. 14i4.1160
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/217841
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Meaning ul
manage ial
ac ion
planning:
The
mancial
componen
J.G.
Ko ze
School o Business Leade ship, Uni e si y
o
Sou h A ica, P e o ia
An
inno a i e o ien a ion is a highly desi able cha ac e is ic
o
senio -middle and op managemen eams in business o ganiza-
ions.
The
o malized exp ession o such en ep eneu ial lai may
be
de eloped in he o m o ac ion plans. Such plans consis
o
i e elemen s, o which
one,
namely he inancial componen , is
o p ime impo ance. Th ee ca ego ies o ac ion plans a e
dis inguished and he e alua ion o he an icipa ed inancial im-
pac o ac ion plans wi hin each ca ego y discussed. Finally, he
in eg a ion
o
he an icipa ed inancial esul s
o
ac ion plans in
he o mal long- and sho - e m plans o an o ganiza ion is
desc ibed.
S.
A .
J.
Bus. Mgm . 1983,
14:
156-
160
'n
lnno e ende o ian asie is
'n
baie gesog e eienskap an senio -
middel-
en
opbes uu spanne in 'n bed y so ganisasie. Die o -
malise ing
an
sodanige en ep eneu skap mag in die o m an
aksieplanne geskied. Hie die planne bes aan ui y elemen e,
waa an een, naamlik die inansi~le komponen , an die
alle g oo s e belang is.
D ie
ka ego i~
an
aksieplanne wo d
onde skei
en
die e aluasie
an
die e wag e inansi~le impak an
aksieplanne wa binne elke ka ego ie esso ee , besp eek.
Laas ens wo d die in eg asie
an
die e wag e inansi~le esul a e
an
aksieplanne in die o mele lang-
en
ko e mynplanne an 'n
o ganisasie besk y .
S.·A . Tydsk . Bed y sl.
1983,
14:
156-
160
J.G.
Ko z
School
o
Business Leade ship, Uni e si y
o
Sou h A ica,
P.O. Box 3~2. P e o ia 0001, Republic
o
Sou h A ica
Accep ed July
1983
In oduc ion
In
ecen yea s se e al managemen heo is s1•2•3 ha e em-
phasized he impo ance
o
inno a i e en ep eneu ial ac ion
hinking in any o ganiz.a ion. Al hough such
an
o ien a ion
is
aci ly expec ed
om
e e y
membe
o
an
o ganiza ion,
i
is
apidly becoming a o mal equi emen
o
all senio -middle-
and
op-manage ial posi ions.
The
in ellec ual, en ep eneu ial
abili y
o
hese execu i es
o
ini ia e p esen ac ion aimed a
capi alizing
on
p edic ed a ou able ends
and
o
minimize
he impac
o
un a ou able ends;
o
imp o e
on
an
exis ing
si ua ion, whe he a ou able
o
un a ou able; and
o
imeous-
ly
adjus o ganiza ional ope a ions
o
deal wi h unan icipa ed
en i onmen al changes cons i u e
impo an
elemen s
o
hei
pe o mance.
Undi ec ed en ep eneu ial ac ion can, ob iously,
be
dys-
unc ional. The p ocess should, he e o e,
be
con inuously
ig-
ge ed by
and
di ec ed
and
co-o dina ed wi hin a o mal ame-
wo k
o
planning
and
con ol sys ems.
Fo
an
exposi ion
o
such a amewo k, he in e es ed eade
is
e e ed
o
Schu e.4
This a icle illus a es
he
o mal exp ession
o
inno a ion
ac ion in he o ma
o
an
ac ion plan.
One
elemen , namely
he inancial componen , is analysed in g ea e de ail and he
in eg a ion
o
he
an icipa ed inancial esul s
o
app o ed
ac-
ion plans in he o mal long-
and
sho - e m plans
o
he
o ganiza ion is desc ibed.
Fonna o ac ion plans
An
ac ion plan should encompass
he
ollowing i e majo
elemen s:
he
objec i e
o
he
planned ac ion should
be
s a ed in
ope a ional e ms;
he successi e s eps
o
be
aken
o
ensu e achie emen
o
he objec i e should
be
de ailed;
he esponsibili y s uc u e in ol ed in he execu ion
o
he
s eps mus
be
s a ed;
he
a ge da es
o
he
comple ion
o
e e y s ep mus
be
de e mined;
he es ima ed inancial impac
o
he p oposed ac ion mus
be
e alua ed.
5
These elemen s can
be
combined in
he
gene al o ma as
depic ed in Table
I.
The
inancial componen
is
i ally impo an as his ins ills
he
discipline
o
hinking a p oposed cou se
o
ac ion h ough
in a logical sequence. I is, also, no mally
he
mos di icul
elemen in o mal ac ion planning. This componen
is
he e o e
analysed in g ea e de ail in
he
emainde
o
his a icle.
This analysis
can
be
ca ied h ough
mo e
meaning ully in
S.
A . J. Bus. Mgm . 1983, 14(4)
Table
1
A1.1ion
plan no.:
..................
.
Objec i e:
............................................................................
.
···························································································
S eps Responsibili y Comple ion da es
.......................... ··························
································
··························
··························
································
·························· ··························
································
An icipa ed inancial impac
R ............................ .
Ne
inancial impac R
a amewo k
o
he majo
classes
o
ac ion plans.
Acco dingly,
a classi ica ion
o
he di e en ypes
o
ac ion plans
which
migh
be
encoun e ed
in
an o ganiz.a ion
is
de eloped
in
he
nex
sec ion.
Classi lca lon
o
ac ion
plans
The
objec i e
o
ac ion plans may
be
o imp o e on he an-
icipa ed esul s
o
he inancial yea
in
which
he
en-
ep eneu ial ac ion
is
being ins i u ed. In his
case,
he
p edic ed inancial impac
o
he ac ion plan
is
no
expec ed
o ex end beyond he inancial
yea
end. The an icipa ed
inan-
cial
impac
o
o he ac ion plans may a ec he esul s
o
se e al
u u e inancial pe iods. Some ac ion plans equi e an
ope a ing expendi u e
while
o he s
necessi a e
a capi al
in es men .
In
Table
2,
ac ion plans a e classi ied
u ilizing
he concep s
o
sho e sus long e m and ope a ing expendi u e
e sus
capi al in es men .
Table
2
P esen inancial yea
P esen and u u e
inancial yea s
Ca ego y A
Ope a ing expendi u e Capi al in es men
A
B
C
Ac ion
plans
in
his
ca ego y no mally
equi e
a
ela i ely
small
ope a ing expendi u e
wi h
he
objec i e
o
achie ing
some
le el
o
cos sa ings and/o some inc ease
in
e enue
in
he
emain-
ing po ion
o
he inancial yea .
The app o al
le el
o
hese ac ion plans
is
usually
ela i ely
low
in
he o ganiz.a ional hie a chy.
The ex en
o
inancial analysis
equi ed
o he app o al
decision
is
limi ed.
Ca ego y B
Ac ion plans in his ca ego y no mally equi e
ela i ely
la ge
ope a ing expendi u es wi h he objec i e
o
a~~e ing
c_os
sa ings
and/
o inc eases in e enue
in
he
emammg
po ion
o
he inancial yea
as
well
as
in
succeeding
inancial
yea s.
The app o al
le el
o
hese ac ion plans
is
ypically
highe
in
he hie a chy han he Ca ego y A
le els
due o he la ge
157
amoun s
o
expense
in ol ed.
As
he
inancial
impac
is
expec ed
o ex end
o e
se e al
inancial
yea s,
mo e sophis ica ed
inancial
analysis
han in
he
case
o
he Ca ego y A plans
is
equi ed o he app o al
decision.
Ca ego y C
Ac ion
plans
in
his
ca ego y equi e a capi al
in es men
ou lay. Addi ional land,
buildings,
equipmen and/o
ehicles
ha e
o
be
ob ained o
mee
he
objec i es
o
hese
plans. The
amoun s equi ed
migh
be
ela i ely
small
( o
example,
he
pu chase
o
a
deli e y
ehicle)
o qui e
la ge
( o
example,
ex-
ensions o p oduc i e
capaci y).
The
an icipa ed
inancial
impac
o ac ion plans
in
his
ca ego y
always
ex end
o e
mo e
han
one
inancial
yea .
The
app o al
le el
o
he
majo i y
o
ac ion plans
in
his
ca ego y
is
usually
high
in
he o ganiza ional hie a chy.
In
he
case
o
majo capi al
in es men s,
he app o al
le el
is
usually
he
boa d
o
di ec o s.
Ve y
comp ehensi e
inancial
analysis
is
usually
equi ed
o
Ca ego y C ac ion
plan
p oposals.
The
quan i ica ion o
he
expec ed
inancial
esul s
o
hese
h ee
classes
o
ac ion plans
may
di e
in
he
deg ee
o
de ail
equi ed
as
well
as
in
he
app op ia e me hod
o
analysis
o
be
employed.
Quan i ying
he
an icipa ed
inancial
esul
In
Table
3,
an ac ion plan
de eloped
in
an au omo i e
com-
ponen
company,
6
illus a es
he
equi ed
onna o a
Ca ego y
A ac ion plan.
The
inancial
analysis
equi ed
is
a
simple
accoun ing
calcula-
ion
o
he
inc emen al inc ease/dec ease
in
cash
in low
and
he inc emen al inc ease/dec ease
in
cash
ou low esul ing
om
he
success ul
implemen a ion
o
he ac ion p og amme
du ing he emainde
o
he
inancial
yea .
Table
3 Objec i e: To inc ease he ma ginal con-
ibu ion
o
sales h ough selec i e p ice inc eases
by
R40
000
o
he end
o
he inancial yea
S eps
By
whom
By
when
-Issue ins u ions
o
ma ke
Ma ke ing
manage 30
June
esea ch
D.
McDu
-Tes he ma ke o elas ici y
o
Ma ke esea ch
31
July -wi hin
demand a inc eased p ices
o
B.
Smi h 4 weeks
p oduc A
BC
and al e na i es,
D&E
-Analyse esul s,
selec:
p oduc: s Ma ke ing manage 7 Au1us -wi hin
o inc ease and implemen D. McDu I week
inc ease
P o i impac
Inc eased ma ginal con ibu ion
P oduc A IO' inc ease
in
u no e 80 000
RB
000
P oduc B
6"'
inc ease in u no e 300 000 RIB 000
P oduc: c
41 '
inc ease in u no e 400 000
R_l_6
ooo
____
_
R42000
Less
addi ional p omo ion in
suppon
o
P oduc:
B_(_2_000_)
___
_
R40000
In Table 4, an ac ion plan de eloped
in
an
elec ical
ap-
pliance manu ac u ing
co .
es
as an illus a ion
o
158
Tabla
4 Objec i e: In oduce low manu ac u ing-
cos cooke
o
comba impo s by No embe 1981.
Deale p ice o
be
R250,00.
Fea u es as p~ schedu.le
AWHK/LAB
1019.
To achie e budge ed inc ease in
sales 15% p.a.
I .
P og amme:
Facili y Responsible
Da e
(a) Finalize ma ke ing Comple e
ea u es p ice and size MKTG. D.J.S.
(b)
Ten a i e cos ing
o
30.10.80
mock-up COSTING M.W.G.S.
(c)
Wo king p o o ype o 01.11.80
es ing ENG. F.M.C.
(d) Enginee ing d awings
comple e ENG.
F.M.C.
I0.12.80
(e)
Final cos ing comple e COSTING M.W.G.S. 03.01.81
( )
Capi al equi ed signed
o
FINANCE T.B. 15.01.81
(g)
Tooling and ool ials
comple e
MNFG.
H.S.G.
15.07.81
(h) P e-p oduc ion pilo
un comple e
MNFG.
H.S.G.
15.08.81
(i)
Sample o ma ke ing o
ad e ising copy
and
sales li e a u e ENG. F.M.C. 01.09.81
(j) Se ice speci ica ions
and ca alogues comple e SERVICE N.R.W. 01.10.81
(k)
Job
I p oduc ion MNFC.
H.S.G.
01.11.81
(I)
Dis ibu ion o egional
wa ehouses DISTR(N)
M.L.M.
23.11.81
2.
P o i impac
Using cos sa ings as p e iously abled which esul in
IO"lo
sa ing in
a iable cos s and allowing
50Jo
educ ion
in
sales p ices, p o i impac
o
12
mon hs as ollows:
Yea
I Yea 2
Yea
3
Inc eased
sales
con ibu-
ion
100
130 170
Va iable
manu ac u ing
expenses
72,3
96,5
128
Fac o y
a .
ma gin
27,7
33,S
42
Wa an y
& dis ibu ion
6,9
7,5 9
Va iable
ma gin
20,8
26
33
Fac o y
ixed
expenses
9,8
II
13
Ne p o i : 11,0
15,0
20,0
he equi ed o ma
o
a Ca ego y B ac ion plan.
The
inancial impac analysis ex ends o e
mo e
han
one
inancial yea . The p obable impac
o
in la ion, acco dingly,
has
o
be
conside ed. In he illus a i e ac ion plan, i
is
aci ly
assumed ha in la ion will ha e exac ly he same impac
on
all he
majo
i ems
o
cash in low as well as cash ou low. I
his
is
no
he
case,
he
p edic ed in low
and
ou low calcula-
ions o e e y inancial yea ha e
o
be
adjus ed
o
e lec
he
an icipa ed impac
o
in la ion.
Finally, in Table 5, a hypo he ical ac ion plan se es as
il-
lus a ion
o
he equi ed o ma
o
a Ca ego y C ac ion plan.
The inancial analysis equi ed o Ca ego y C ac ion plans
necessi a es ca e ul conside a ion
o
he
ollowing ac o s:
he ime alue
o
money;
he
discoun ing ac o
o
be
used
in
he
p esen alue
calcula ions;
he p edic ed sal age alue
o
any capi al asse s;
S.-A . Tydsk . Bed y sl.
1983,
14{4)
- he impac
on
he exis ing wo king capi al le el
o
he p o-
posed capi al acquisi ion
and
he
subsequen eco e y
o
he
w n
il.iug
~pi a -. he
end
o
he
economic li e
o
he
capi al asse ;
- he impac
o
in la ion
on
he an icipa ed cash in lows and
ou lows;
- he axa ion e ec
o
he
p oposed
capi al acquisi ion
in
he o m
o
ini ial
and
in es men allowances; he dep ecia-
ion ax allowance
and
he ax e ec
o
he p edic ed
sal age alue
o
he
capi al asse .
Fo
a de ailed discussion
o
he abo e ma e s, he in e es ed
eade
is
e e ed
o
Cla k,
Hindelang
and
P i cha d.8
In eg a ion
In o
he
inancial
planning
and
con ol
p ocesses
The
la ge, well-managed business o ganiza ion will p obably
use all
o
mos
o
he
ollowing
o mal
planning and con ol
documen s:
a s a egic plan;
- a capi al budge ;
a long ange business plan: his
documen
no mally akes
he o m
o
an
ope a ing budge which co e s a u u e
pe iod
o
h ee
o
i e inancial yea s;
a sho ange business plan: his
documen
is
no mally he
annual
ope a ing budge ;
- a planning
'b idge
o
pe o mance'
s a emen ;
a con ol
'b idge
o
pe o mance'
s a emen .9
The
an icipa ed inancial esul s
o
he
h ee ca ego ies
o
ac-
ion plans will
be
e lec ed in
Table
6.
Ca ego y A ac ion plans a e de eloped
on
a ecu ing basis
wi h he objec i e
o
imp o ing
he
an icipa ed inancial esul s
o
he
cu en accoun ing pe iod.
The
de elopmen
o
hese
ac ion plans
is
a eac ion
o
almos con inuous p essu e
o
ad-
jus a ou ably
o
changing ci cums ances. These a e, acco -
dingly,
'con ol'
o
' eplanning'
ac ion plans
and
he an-
icipa ed inancial impac does
no
a ec any o mal planning
o
con ol documen , excep he con ol b idge
o
pe o mance
s a emen which should
be
de eloped
on
a egula (mon hly
o
qua e ly) basis. This
documen
is, in essence,
an
upda ed
o ecas
o
yea -end esul s inco po a ing he an icipa ed esuhs
o
app o ed ' eplanning' ac ion plans.
Ca ego y B ac ion plans a e de eloped
on
he same basis
as Ca ego y A plans
bu
he
an icipa ed inancial esul s
will
a ec mul iple accoun ing pe iods. They a e, he e o e,
analysed
and
alloca ed
o
hese pe iods as ollows:
The
o al
impac
o
such
an
ac ion plan
is
aken
up
in
he
long ange
business plan;
he
o ecas ed impac
on
he
inancial yea
ollowing he accoun ing pe iod in which such
an
ac ion plan
is
de eloped,
is
included in
he
sho
ange business plan as
well as in he planning b idge
o
pe o mance s a emen . (The
la e
is
he
mos
impo an
wo king
pape
om
which he
sho ange business plan
is
de eloped.) Finally, any impac
an icipa ed in
he
yea in which
he
ac ion
plan
is de eloped
is, as
is
he case wi h Ca ego y B plans, included in he con-
ol b idge
o
pe o mance
s a emen .
The in eg a ion
o
Ca ego y C ac ion plans di e s om ha
o
Ca ego B in as
much
as
he
en i e cash in low
and
ou low
associa ed wi h
he
ac ion plan a e also included in he capi al
budge
o
he
o ganiza ion.
Fu he mo e,
he
s a egic plan
o
he o ganiza ion
is
a ec ed as well. In he o mula ion
o
a s a egy, as a as he inancial
componen
is
conce ned, wo
s ages
may
be
iden i ied.
The
alloca ion
o
inancial esou ces
and
he eleasing
o
such esou ces.
The
alloca ion
o
esou ces
equi ed o
an
app o ed s a egy
is
aken
up
in he o ma
S.
A . J. Bus. Mgm .
1983,
14(4)
lS9
Table.s Objec i e:
To
e~ end p oduc i e capaci y
by
he pu chasing o a
new
indin
machine, No.
Mx
1930,
wi h
an
expec ed economic li e o 5 yea s and cos ing ~100
oo8
S eps
a.
P epa e memo andum o boa d app o al
b. Ob ain boa d app o al
c.
Supply speci ica ion o p ocu emen di ision
d. O e see ins alla ion o machine
e.
Commissioning
o
machine
An icipa ed inancial impac
Ini ial in es men :
-Machine
-Wo king capi al
Ope a ions:
-Cash in low
-Cash ou low
Ope a ing cash lows
Income ax
Cash lows a e ax
P esen alue
o
RI
@ 0,12•
P esen alue:
Cash in lows
Calcula ion
o
axa ion e ec b
Ope a ing cash lows
Sum-o -yea s
digi s
dep ecia ion
Taxable income
Income ax @
50070
P esen alue: Cash in lows
P esen
R(IOO
000)
(20
000)
Yea
I
Rl20
000
80
000
40
000
3
333
36
667
0,8929
32
740
Yea I
40
000
33
334
R6
666
R3
333
P esen alue
o
wo king capi al eco e y:
20
000
x 0,5674
Less: In es men
Ne
P esen Value
"A
1207o
in es men hu dle a e (cos
o
capi al)
is
assumed.
Responsibili y
Indus ial Enginee
Ope a ions
Manage
Ope a ions
Manage
Indus ial Enginee
Enginee ing Di ision
Supplie
Indus ial Enginee
Yea
2 Yea 3
R120
000
R120
000
80
000
80
000
40
000
40
000
6
666
10
000
33
334
30
000
0,7972 0,7118
26
574
21
354
Yea
2 Yea 3
40
000
40
000
26
667
19
999
R13
333
R20
001
R6
666
RIO
000
RIIO
854
11
348
122
202
120
000
2
202
Comple ion da es
31.03.1983
30.04.1983
05.05.1983
30.06.1983
04.07.1983
Yea 4 Yea 5
R120
000
R120
000
80
000
80
000
40
000
40
000
13
333
16
667
26
667
23
333
0,6355 0
5674
16
947
13
239
Yea
4
Yea
S
40
000
40
000
13
334
6
666
R26
666
R33
334
Rl3
333
R16
667
bi
is
assumed ha his in es men does no quali y o ini ial and in es men ax allowances, and ha he machine has
no sal age alue.
Table 6 Ac ion plan impac s
in
he planning
and
con ol p ocess
Ca ego y A Ca ego y B Ca ego y C
S a egic plan X
Capi al budge X
Business plan: long ange X X
Business plan: sho ange X X
B idge
o
pe o mance:
planning X X
B idge
o
pe o mance:
con ol X X X
o
an ac ion plan
and
o ms pa
o
he s a egic plan. The
second s age, he eleasing
o
esou ces,
is
implemen ed on he
s eng h
o
a inancial analysis as illus a ed in Table
5.
Concluslon
In his a icle an ex emely impo an p e equisi e o he suc-
cess
o
a business o ganiza ion, namely, di ec ed en ep e-
neu ial lai , has been de ined and o malized
in
he o ma
o
an
ac ion plan. One componen
o
such a plan - he an-
icipa ed inancial impac -was analysed
and
desc ibed in
g ea e de ail.
P ac ical esul s
in
o ganiza ions which ha e implemen ed
he concep
o
o malized en ep eneu ial ac ion as
an
in eg al
elemen
o
excellen pe o mance on he senio -middle o
op
managemen le els, a es o he alue
o
his o ien a ion.
Re e ences
I. A gen i, J. Sys ema ic co po a e planning. Middlesex: Nelson,
1979.

160
2.
Schu e, F.G. Budge a y Con ol sys ems o he eigh ies,
J.
Gen.
Manage., ol.S, no.3, 1980.
3.
Wa son, C.E. Resul s-o ien ed managing. Reading, Massachuse s:
Addison-Wesley,
1981.
4. Schu e, op. ci .
S.
Wilson, S.R. & Tomb,
J.O.
Imp o ing p o i s h ough in eg a ed
planning and con ol. New Je sey, Englewood Cli s: P en ice-
Hall,
1970.
S.-A .
Tydsk . Bed y sl.
1983,
l4(
4)
6.
Schu e, op. ci .
7.
Cason,_ F. (No i le). _P e o ia: Uni e si y
o
Sou h A ica, School
o
Business Leade ship, Ad anced execu i e p og amme,
1981
(Di ec i e Managemen sc ip ).
8. Cla k,_
J.J.,
Hindelang,
T.J.
_&
P i cha d, R.E. Capi al Budge ing:
Planning
and
con ol
o
capi al expendi u es. New Je sey,
Englewood Cli s: P en ice-Hal, 1979.
9. See Schu e, 1980, op. ci . (Planning & Con ol 'wo king pape s').