Financial Planning

  Financial Planning

            Financial planning of a business is the process or objective of determination of whether a business is able to afford to achieve or accomplish its goals as well as strategic objectives. Most financial plans in most businesses are created immediately the objectives and vision of the business have been put in place (Aboagye & Jung, 2018). It depicts or portrays all the activities, equipment, resources as well as the materials required need to achieve the set objectives within the stipulated timeframe (Joo & Choe, 2017). It is formulated to foretell the future financial outcomes as well as ascertain the best way to use a firm’s financial resources in the reach for the long-term and short-term goals and objectives. The aim of this research is to identify and discuss financial planning of businesses, its importance and also determine the effects of poor financial planning.

There are several tasks involved in the financial planning activity such as the assessment of a firm’s surrounding environment, the identification of the resources required for the achievement of the business objectives, quantifying the number of disposable resources for the firm, i.e. machinery, labor force among others (“Raising the standard for financial planning”, 2018).  .  In addition, it also involves the identification of risks the business or organization is likely to face during the course of operation. Financial planning is key and very essential for the success of any firm as it gives a firm the ability to prove the achievability of its goals as well as it aids in the setting of financial targets and goals for the firm.

According to Joo & Choe, (2017), studies, as well as researches, have proven financial planning as inevitable in any business operation. This is because financial planning controls the cost of operation. The creation of annual budgets enables a firm to plan for its expenses, reduce any expense where necessary as well as give the firm the ability to monitor and determine whether its operations are on track (Aboagye & Jung, 2018).. Financial management helps address interest payments and debt management by putting them in the budget. Therefore, all debt repayments are accelerated and the interest expense is reduced. Financial planning estimates the taxes of a firm and adjusts the estimates with the increase and decrease in the sales (Cao & Liu, 2017).. This helps avoid fines and penalties associated with the late payment of tax.

Aboagye & Jung, (2018), asserts that when financial planning is poorly done, this is referred to as poor financial planning which is responsible for debts where it becomes easy for a firm to overspend unaware leaving behind accumulated debts spiraling out of control. Poor financial planning spells disaster as the firm is not well prepare for any unexpected event which is a situation of massive expenditure (Joo & Choe, 2017).. Improper planning results to little resources available for enjoyment during retirement. From the research, conducted, the following data is provided as evidence for the need of a good financial plan.

From the data provided in the above graphs and pie chart it has remained evident that for the prosperity of a firm, a good financial plan should come in handy. For the case of a well-planned firm that which is poorly planned, the output of the well-planned firm is higher as compared to the other this is because the firm is able to allocate its resources perfectly. Similarly, the second graph compares two financial plans to determine the most effective.

In conclusion, the perfectness and exactness of a financial plan highly depend on the fitness of the information to be used in the financial model’s assumptions. Despite the fact that consumer reaction and behavior is unpredictable, financial plans ensure the success of the business.

References

Aboagye, J., & Jung, J. (2018). Debt Holding, Financial Behavior, and Financial Satisfaction. Journal Of Financial Counseling And Planning, 29(2), pg. 2. doi: 10.1891/1052-3073.29.2.208

Cao, Y., & Liu, J. (2017). Financial Executive Orientation, Information Source, and Financial Satisfaction of Young Adults. Journal Of Financial Counseling And Planning, 28(1), pg. 5. doi: 10.1891/1052-3073.28.1.5

Joo, S., & Choe, H. (2017). : Financial Planning Revieww 1000 (Review of Financial Planning Research: 10 Years of Financial Planning Review). SSRN Electronic Journal.pg. 2 doi: 10.2139/ssrn.3084432

Raising the standard for financial planning. (2018). Financial Planning Review, 1, pg. 1 e1015. doi: 10.1002/cfp2.1015