These terms had been confusing me for a long period of time, but then I realized that the budgeting is a type of planning. So many businesses doing what-they-call budgeting are actually involved in planning. It is a good idea as many enterprises do not consider planning at all.

What is the difference between planning and budgeting?
Actually, the difference lies in the centers of financial liabilities if we consider budgeting. In other words, the head of the department having approved his budget can dispose of the capital within the stated budget.

Note! You have to draw up the budget and then try to make a profit without exceeding the expenditures. The head of the department will be interested in “collecting” and “not exceeding” only if he is motivated properly (as a rule, financially). If you do not motivate the heads of the budgeted department, this work will be useless.

Planning consists of two stages:

1. Income planning.
2. Expenditure planning.

Let’s start from the most important and almost unpredictable:

Income planning.

If you have not carried out the qualitative marketing research and have not developed your own marketing strategy you will not be able to plan an income properly. Please, pay attention to the sentence stated below, it is of great importance.
It you do not know the market and do not realize the steps you should take further it is impossible to do a qualitative planning of your enterprise.
You should remember that different industries have different approaches to income planning as they use different figures and conditions. For example, if your company deals in consumer goods (trades or produces) while planning you should consider the market volume, competition and your own competitive features, but if you have a construction company you should have a stock of orders for the planning period, otherwise, your planning will remind the income wish list.
One more point to remember while planning the sales and cash flow are different notions. When you plan cash inflow you need to consider the payment terms in the standard agreements to be concluded with the customers (if we talk about consumer goods) or the payment terms in the concluded agreements if we talk about construction or any large-scale production. So in the second case your planning is useless without the agreements having been concluded before.

Expenditure planning.

When you have defined the volume of the goods or services your company is going to sell in the planning period, you can start planning the resources necessary for complying the planned sales volume figures.
Expenditure planning can be divided into three parts:

1. Planning investments.
2. Planning direct (variable) costs.
3. Planning indirect (fixed) costs.

Planning investments.

It is a simple table with the list of initial costs. In other words, all the costs you cover when you start your own business.
Note! Regular operating costs are not included here. This is the table of one-time costs.

Planning direct (variable) costs.

Direct (variable) costs are planned on the basis of sales volume. In other words, each product sold at the selling price has a unit cost, which is considered when the product is written off the warehouse.

Planning indirect (fixed) costs.

Indirect (fixed) costs are those which are not directly connected with the sales volume. Do not be misled be the word “fixed”. It does not mean that the sum of the costs is invariable, it is sure to vary. They are called fixed as their amount does not depend on the sales volume.
Indirect costs can be planned in several ways.
1. On the basis of previous periods statistics if any.
2. On the basis of physical indicator norms (for example, a number of workers, cars used, floor area etc.)

What software to use in planning.

In fact, you have a lot of alternatives, but the most common widespread variant is Excel. Surely, there are specialized software products such as Project Expert. Each option has its own advantages and disadvantages.
Excel allows calculating on the basis of any conditions and calculation methods, but an economist will have to detail the calculation manually, to adjust the report form and so on. Moreover, Excel does not have “fool-tolerance”.
Project Expert has a ready-made mechanism, all report forms are adjusted, a report designer will help if you lack some figures. It is difficult to change the figures accidentally, but possible.

Note! Project Expert can perform calculations using only the algorithms and data which are stipulated by the program. Despite the fact that there are a large number of tools I failed to add some conditions (especially in planning a day-to-day activity of the enterprise). Moreover, you have to be able to use this rather peculiar program, some options can be found in unusual places so it can take time to discover them.
I will not describe planning in Project Expert (though it is rather interesting, and maybe someone will like it), but I have an example of planning in Excel