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In general usage, a Financial Plan
can be a Budget, a plan for spending and saving future
income. This plan allocates future income to various
types of expenses, such as rent or utilities, and also
reserves some income for short-term and long-term savings.
A financial plan can also be an investment plan, which
allocates savings to various assets or projects expected
to produce future income, such as a new business or product
line, shares in an existing business, or real estate.
In Business, a Financial Plan can refer to the three primary financial statements
(balance sheet, income statement, and cash flow statement) created within a Business
Plan. Financial forecast or financial plan can also refer to an annual projection
of income and expenses for a company, division or department. A financial plan
can also be an estimation of cash needs and a decision on how to raise the cash,
such as through borrowing or issuing additional shares in a company.]
While a financial plan refers to estimating future income, expenses and assets,
a financing plan or finance plan usually refers to the means by which cash will
be acquired to cover future expenses, for instance through earning, borrowing
or using saved cash. |
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| Business
Financial Planning |
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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) required
- Calculate the total cost of each
type of resource
- Summarize the costs to create a
budget
- Identify any risks and issues with
the budget
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. |
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| Corporate
Budget |
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The budget of a company is compiled
annually. A finished budget usually requires considerable
effort and can be seen as a Financial Plan for the new
financial year. While traditionally the Finance department
compiles the company's budget, modern software allows
hundreds or even thousands of people in the various departments
(operations, human resources, IT etc.) to contribute
their expected revenues and expenses to the final budget.
If the actual numbers delivered through the financial year
turn out to be close to the budget, this will demonstrate
that the company understands their business and has been
successfully driving it in the direction they had planned.
On the other hand, if the actuals diverge wildly from the
budget, this sends out an “out of control” signal
and the share price could suffer as a result. |
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| Request
for Proposal |
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