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1C Việt Nam
(02.11.2024)

What is AOP? 7 Steps to Build an Effective AOP

What is AOP ? AOP plan is an important factor that directly affects the development process of a business, especially in business activities. To understand the concept of AOP and the steps to build an effective AOP, let's learn with 1C Vietnam through the article below!

1. What is AOP?

AOP (Annual Operating Plan) is a tool that helps orient operating goals, business plans and expected revenue and expenditure budgets for a year. An AOP table will include accurate information about the work, tasks, goals of each department and corresponding financial limits. Thanks to that, departments and teams will clearly understand the goals to be achieved in order to develop specific strategies and quickly complete assigned tasks.

The goal of AOP is to combine forecasts, budgets, and plans from different departments into a unified whole for the business. AOP helps departments and divisions unify goals and set appropriate standards for implementation together. Thereby, AOP will ensure that the business operates smoothly, in the right direction, and effectively.

What is aop?
AOP is a tool to guide operational goals, business plans and projected revenue and expenditure budgets.

2. Criteria for a good AOP

The more detailed an AOP plan is, the more it ensures that management can monitor the situation and manage operations effectively. Below are the criteria that an AOP plan should have:

  • Alignment with strategic goals: The AOP plan needs to ensure that activities are carried out in line with the business's direction.
  • Accurate and realistic: AOP needs to be established based on sound business forecasts and realistic goals for the plan to be effective.
  • Complete and specific: A complete AOP plan should include specific activities and goals for each department and area of the business.
  • Clear Allocation: The AOP plan should clearly outline the activities and goals of each department and area of the business.
  • Flexible and adaptable: The AOP plan needs to be flexible and easily adaptable to accommodate changes during implementation.

3. The role of AOP in business

The AOP plan plays a very important role in the sustainable development of the enterprise. The main subjects implementing the AOP plan are usually the CEO, strategic management departments, business management, financial management and production management. At this time, leaders need to focus on market research, observing resources before setting goals based on clear directions.

3.1 In the business field

Building a comprehensive AOP is a top and indispensable task in business, helping to promote business development. Specifically:

  • Support businesses to fully and accurately define goals, creating a foundation for departments to strive and aim for an accurate, unified and unbiased goal.
  • Support management in evaluating, monitoring and adjusting the activities of departments, divisions and processes in the enterprise.
  • Ensure businesses can easily control progress towards achieving goals.
  • It is a premise for easy prediction and orientation of business activities in the coming years.
What is aop?
AOP planning helps businesses set complete and accurate goals.

3.2 For marketers and business owners

The AOP plan will be a great help for marketers and business owners to improve their planning skills, execute strategies and create an overview of a year of business operations. Thereby, helping marketers and business owners estimate financial capacity, effectively implement revenue and expenditure and ensure optimal profit.

4. 7 steps to build a systematic and effective AOP

4.1 Step 1: Gather the staff

The key to the success of an AOP plan is having a professional planning team. Therefore, allowing employees to participate and give their opinions will help leaders have an overall view of the business's operations, thereby orienting and determining the most accurate goals. In addition, businesses can use some internal or outsourced consultants to support more effective planning.

What is aop?
Businesses need to collect opinions from employees to orient the most appropriate goals.

4.2 Step 2: Analyze data from previous years

After assembling the staff, the business needs to review and evaluate the business performance from previous years, possibly through financial reports, budget reports, etc. to provide basic guidance for the process of building the AOP plan. In addition, reviewing past activities also helps the business grasp the peak periods when it is necessary to focus budget, resources and necessary activities to build the most comprehensive annual plan.

4.3 Step 3: Set specific and realistic goals

Setting specific and realistic goals is important, especially when developing an AOP plan. However, businesses need to pay attention to the following issues to avoid mistakes:

  • Don't set too many goals, instead just set a maximum of 5 main goals so that every department can easily implement them.
  • Observe and evaluate the performance of each department and division in the enterprise.
  • Classify the factors that do not contribute to operational efficiency.
  • Identify what needs to be changed or adjusted to be more effective.
  • Evaluate the corporate organizational structure and recommend changes if any.
  • Identify specific results to improve overall business performance.

4.4 Step 4: Identify and set KPIs

Based on the results outlined in the above step, the enterprise needs to establish indicators to measure the effectiveness and level of completion of the enterprise's set goals. From there, continue to develop KPIs and specific tasks that employees and departments need to perform, helping the entire process focus on the most core elements.

4.5 Step 5: Make a monthly budget

To maintain financial capacity and revenue and expenditure activities in a year, businesses can set up a monthly budget for easier management. At the same time, apply separate budgets for each case such as capital cost increase, unprofitable period or purchase of long-term assets to ensure that the general budget is not overspent.

4.6 Step 6: Prepare contingency plans for risks

It is essential to consider potential risks during AOP planning, including: What could prevent the business from achieving its goals? What could go wrong in every aspect of the business?

The business can then build a set of possible solutions for the annual operating plan. This way, the business will be prepared if the project fails but does not affect the overall picture.

4.7 Step 7: Perform periodic inspections

Businesses should choose the right time to evaluate the plan, the work to be done includes: Monitoring, tracking the progress of the AOP plan, analyzing KPIs, identifying obstacles... This will help businesses confirm the success or failure of the plan to implement timely improvement solutions.

5. Harmful effects of not applying AOP

As mentioned, the AOP plan plays a guiding role for the entire business activities of the enterprise in a year. Therefore, not having a comprehensive plan like AOP would be a serious shortcoming, causing negative impacts for the enterprise. For example:

  • If the goals are not clearly and fully defined, it will cause the activities of the departments to lose continuity and consistency.
  • Planning for each stage of the year will become rambling and off track without specific goals.
  • The tasks of personnel and departments in the enterprise will not be allocated properly, leading to many problems and risks arising.
  • Having trouble evaluating and managing business operations because of lack of initial goals and direction.
  • Difficulty in developing solutions or backup plans in case of unforeseen changes, risks or adverse situations.
What is aop?
Without applying AOP plan, businesses will encounter obstacles in managing business operations.

6. Support management in defining effective target indicators and strategies with 1C:ERP

1C:ERP business management solution is a powerful tool that possesses a modern, global technology platform and the ability to deploy 2 times faster than other solutions. This is the optimal choice, helping businesses manage goals and develop appropriate AOP strategies to achieve business goals, while overcoming technological challenges in the digital age. 1C:ERP solution is always applied by many managers in business operations with the following strengths:

  • Support automation of the entire process and tasks related to annual planning.
  • An open system helps businesses master technology, master solutions and reduce dependence on suppliers.
  • Provide quick customization to specific business requirements.
  • The solution is compatible with many existing enterprise platforms, popular database management software, operating systems or browsers.
  • 1C:ERP allows administrators to define target metrics and set up real-time reports. At the same time, easily access the system at all times to make timely and correct business decisions.
  • The solution provides a wide range of performance metrics, allowing businesses to analyze and compare metrics in a detailed and intuitive manner.
  • Support businesses to track target indicators to control and adjust plans.
  • Available with a variety of intuitive templates for each type of analytical report, to make decisions effectively.
  • Flexible features help administrators easily access the system using mobile devices to perform operations, including: Target classification, access to partner contact information, and data synchronization to increase operational efficiency.
What is aop?
1C:ERP solution helps businesses manage target indicators and success strategies

7. Frequently Asked Questions about AOP

In addition to the knowledge surrounding what an AOP plan is , many people often wonder about some issues such as who is the subject of implementing the AOP plan?, how to distinguish AOP and budget plan?, and variations of AOP in businesses?. Below are brief answers to the above questions:

7.1 What does AOP include?

A complete AOP plan should include the business's strategic and tactical plans for the coming year. For example:

  • Describe the strategic context and implementation budget.
  • Explain organizational structure and plans to support strategies.
  • Clearly articulate your business goals and OKRs.
  • A breakdown of the metrics that administrators will use to track the entire process.

7.2 Distinguish between AOP and budget planning

In general, both AOP and budget planning refer to the financial structure of the business. However, there are still clear differences between the two concepts, specifically: AOP planning is a document that describes specific, focused goals for each department. Meanwhile, budget planning is more based on numbers and includes revenue targets, financial assumptions, and cost forecasts.

Thus, the above article has presented in detail what AOP is and the steps to build a complete AOP plan to help businesses manage target indicators and strategies effectively. Through this, we hope that administrators have an overview of this topic, thereby effectively applying it in practice to create business performance efficiency. If you have any further questions about the 1C:ERP solution, please contact 1C Vietnam for the most detailed and fastest support.

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