A process of money management that may include any or all of several strategies, including budgeting, tax planning, insurance, retirement and estate planning, and investment strategies. In effective financial planning, all elements are coordinated with the aim of building, protecting, and maximizing net worth.
It is imperative for an organization to indulge in financial planning to asses its financial capabilities and chart out its corporate growth plan.
The fact that financial planning is a process and not a product now finds wide acceptance among financial planning groups and financial professionals.
Financial planning is the task of determining how a business will afford to achieve its strategic goals and objectives. Usually, a company creates a Financial Plan immediately after the vision and objectives have been set. The Financial Plan describes each of the activities, resources, equipment and materials that are needed to achieve these objectives, as well as the timeframes involved. The Financial Planning activity involves the following tasks;- Assess the business environment
Confirm the business vision and objectives
Identify the types of resources needed to achieve these objectives Quantify the amount of resource (labor, equipment, materials) Calculate the total cost of each type of resource
Summarize the costs to create a budget
Identify any risks and issues with the budget set
Performing Financial Planning is critical to the success of any organization. It provides the Business Plan with rigor, by confirming that the objectives set are achievable from a financial point of view. It also helps the CEO to set financial targets for the organization, and reward staff for meeting objectives within the budget set.