An operational and cost plan shows key activities that your business proposes to undertake each year such as:

• Staff training
• Inventory control
• Investment

It shows the number of products and services your business will produce each month. It is the roadmap you will use for planning the purchasing and stocking of raw materials, purchases of equipment and other investments.

It will show the total costs your business is likely to incur each month:

• Material cost
• Labor cost
• Overhead expenses

While the sales forecast helps to estimate the revenue your business will generate, the operational and cost plan helps to forecast the costs you will incur in generating that revenue.

Because total income = total sales – total costs, the sales forecast + operational and cost plan will help you determine the profit your business will generate in the coming year, and forecast the cash that will leave your business.

It will also enable you to better control your business expenditure.