Financial Planning Essay
A successful company has to have skilled workers in each level of the organization from top management to regular employees. A successful company must have good working relationship with suppliers and customers outside the organization as well. A successful company has to have enough funding to be able to execute the company’s plans and operations. Financial planning is a process that estimates the capital required and determining the company competition. It is important for a company to have financial policies in place for the organization to be successful.
The objectives of financial planning are to figure out capital requirements because this will help determine cost of fixed and current assets. In the capital requirement process long and short term requirement has to be evaluated. A company must determine the capital structure of their organization, such as composition of capital and what capital needed for the business (Heer, 2012). In a business it is important to have a system in place to protect the lending and cash control situations. One of the positions that can help with financial planning is a financial manager, which is a manager that can make sure the resources of the company is being utilize to their best of the company ability.
Financial planning is an important process that each company needs to use created objectives, implement policies and procedures. It is important to have adequate funds for the organization. Financial planning helps companies keep track of outflow and inflow of funds, which can create stability for the company (Ehrhardt & Brigham, 2011). It is vital for the company to make sure the suppliers investments are put back into the company. Financial planning is a process that can continue to help the company grow and expansion at the rate necessary for the company success. There is a lot of uncertainty with companies’ financial abilities but with the proper financial planning the uncertainty can be avoided.
A company’s financial plan is used to help make the day-to-day decision within the company operations (Vietz, n.d.). By using the right financial information can determine the health of the company financially. No matter what company a person has it is important to have financial plan in place. A company must plan right because financial burden come up and the company needs to be in a position to have funds available for the burden. A company must have capital to survive in the business world. A business knowing the proper way to financially keep the company making profits is a crucial step in doing business.
A business use financial planning to help determine when revenue is up for the period and when revenue is down for the period. This is an important process because this will help determine when to buy product or services and when not to buy. It is vital for the owner to take these low points of revenue into account because expenditures will need to be tight (Ehrhardt & Brigham, 2011). If the company has poor cash management, the payroll can be affected. By having a financial plan in place will help keep financial stability for the company. A company can have a competitive advantage by being financially ready to purchase inventory at a reduced price.
Financial planning helps long-term business decisions work through planning and time management. The planning process can maintain financial stability for the company growth and make sure the company is moving in the right direction (Murphy & Yetmar, 2010). It is vital for the company to implement a strong financial plan for the company’s future growth. Growth is an opportunity for the company to stay competitive in the markets and develop strong financial ideas.
A business needs to compare actual results to quantifiable targets in order to be able to know if the financial plan is working for the company. An example of the financial plan working effectively would be the company gives the marketing department an increase in the advertising expense account, which leads to a large jump in sales (Vietz, n.d). This is financial planning at its best, working to improve the company’s profits. When the profits are growing then the business can continue to grow and develop.
For some small businesses financial resources must be monitor and provided when needed because finance can be used quickly in small businesses. Financial planning can help a business owner understand the different projects going on and how much funding is needed. Some projects will be more important than others. Many companies use financial planning to improve efficiency, productivity, and market increase (Heer, 2012). Financial planning is a process that every company needs to invest money and resources into. Conclusion
A company is in business to make money. This is why financial planning has high value to many companies. Financial planning is a guide to help make day-to-day decisions for the company. Financial planning has help with cash management through knowing the short and over of cash transactions. Short and long terms decision has to be made for a company to have success. Financial planning has help spot trends within the business operations. The owners knowing the right expenditures the company is pursuing can help operations stay growing. By having the right financial planning system in place will develop the company into a success.
Ehrhardt, M. C., & Brigham, E. F. (2011). Corporate Finance: A Focused Approach. South-
Western Cengage Learing.
Heer, R. (2012). How agile is your planning? Find out by measuring the ROI of your planning
Software. Strategic Finance, 45.
Murphy, D.S., Yetmar, S. (2010). Personal financing attitudes. Management Research Review,
33, (8). 811-817.
Vietz, O. (n.d.). Financial Forecasting Tools. Retrieved from http://smallbusiness.chron.com