Today is when you analyse yesterday to make a better tomorrow. That is the philosophy of BAD Management.
BAD management is what good managers do. They might not call it that, but that’s what’s happening. All the time.
BAD means Budget > Account > Discuss. The good managers plan as best they can for the future, they action their plans, they record the results of the business activity, and then they analyse the variance between what they planned and what happened, and then decide the next action.
Each step has a different place in time. The budgeting is done in advance, the accounting occurs as you implement or action the budget plan, and the comparison discussion occurs afterwards. They continue in an endless cycle.
Each step is critical for different reasons. Only one is required by law; you must do your accounting.
Doing your accounting will produce a financial picture of what you have done. It may or may not be accurate, but what it says is what has happened – at least for now – because your accountant will use those numbers to prepare and lodge your tax return (but will make you sign something to say that you are responsible for the numbers).
Avoid BAD Management
You can avoid practising BAD Management by simply not doing a budget. You can avoid doing the budget, and that will mean you will not have to go through the analysis process. You will save some time in the short term, but it also means that you won’t really know where you are, or have much of an idea about what to do. And the time will come when you will have to spend a lot of time sorting things out.
Doing your accounting only, and not doing a budget, is the same as getting in your car, without a map or plan, and just driving. You won’t know where you are going, and you won’t know where you are until you stop and find out. You might stop by choice because you get bored or worried, or it’s getting dark, or you just run out of fuel.
You’ll need to find out where you are, but you won’t know if you achieved what you wanted, because you didn’t know what you wanted. So that’s not management at all, it’s just reckless activity. It might even suggest that if you don’t have a plan, it’s better not to commence the activity. Overall, it’s managing badly.
Properly Manage Your Business
To properly manage your business, you need the consistent entwined application of the three activities on a consistent cycle. That means that to effectively implement BAD Management, you must today:
- action yesterday’s budget plan for today
- account for yesterday’s activity
- compare the actual result of yesterday’s activity with the planned result and understand the reasons for the difference
- plan for tomorrow, or adjust the plan for tomorrow, based upon the results of today’s analysis
In short, BAD Management is understanding every day why yesterday exceeded or fell short of the target, and then applying that lesson to prepare for tomorrow’s action. It is a continuous cycle of budgeting, accounting and discussing your results to maximise your profits and sustainability.