In simple terms, financial planning is the process which aids the mangers of an organization to determine if the company would be able to reach its goal or not. In most cases, a financial plan for a company is made just after chalking out its vision and mission, and setting of its objectives. A financial plan gives a detailed description of what resources would be needed and tasks that would have to be undertaken in order to fulfill those objectives. It is detrimental to the success of any organization, as it inspects if the goal of the company is achievable from an economic standpoint.
Financial planning is Indispensable for any business, says Michael Briese
The process formulating a financial plan for a company includes its relation to investment, procurement, and administration. These plans are created by expert financial advisors who are capable of analyzing the long-term goals of the company and built a plan in accordance with it. These advisors provide guidance to the managers as well, assisting them in investment management, estate planning and in preparation of income tax. While financial planning is important for every business, not everyone can afford a full-time financial advisor. This is where technology comes in handy. We live in the world of e-mails and Facebook, where we can communicate with anyone across the world by just clicking on a button. Thus, very often small-scale organizations hire external financial advisors who do their work by the virtual inspection of the company and give them a review according to that.
Michael Briese, who is a reputed financial advisor, based in New York states the five definite steps one needs to take in order to create an efficient Financial Plan:
- Identifying the goal of the company
- Quantifying that goal
- Analyzing the financial situation, this includes the income and expenses, asset allocation, etc.
- Developing and implementing the plan according to the result of the analysis
- Monitoring the plan on a regular basis to ensure its suitability
Every step in your life needs financial planning, from buying a house to purchasing a watch. If you end up buying a Rolex, which costs more than the money you have in your pocket, it shall ultimately leave you in debt. Similarly, this may happen in the case of a business too. Without a proper plan, your expenses might exceed your revenue which has a huge negative impact on your business. Continuous occurrence of loses can also lead to dissolution.
Michael Briese points out that with proper financial planning, one gets to see the many positive effects it has on the business, such as:-
- It assures the maintenance of sufficient funds
- Maintains stability by ensuring a proper balance between inflow and outflow of funds
- Safeguards the interest of the investors
- Builds expansion programs which serve the long-term goals of the company, ensuring its stable growth
- Drastically reduces the uncertainties of the business. A company with sufficient funds can easily adapt to evolving market trends.
- Maintaining stability and maximizing the profitability
So if you want your business to run smoothly and reach up to its full potential, making a competent financial plan should be your first step.