Financial Planning PDF

FINANCIAL PLANNING  ALYSSA JULIANA  JILL JAZZNEY OBJECTIVES 1. To determine the capital measurements of the firm 2. To determine the appropriate capital structure. 3. To outline the financial policies with regard to cash control, lending, and borrowings. 4. To ensure...

FINANCIAL PLANNING  ALYSSA JULIANA  JILL JAZZNEY OBJECTIVES 1. To determine the capital measurements of the firm 2. To determine the appropriate capital structure. 3. To outline the financial policies with regard to cash control, lending, and borrowings. 4. To ensure maximum utilization of scarce financial resources at least cost to yield expected returns on investment. IMPORTANCE OF FINANCIAL PLANNING It is a process of setting the objectives, policies, procedures, programmes, and budgets relative to the financial activities and transactions of a firm. The effectiveness of the financial plan is dependent on the adequacy of financial and investment policies. The following state why financial planning is important. IMPORTANCE OF FINANCIAL PLANNING 1. Financial Planning ensures adequacy of funds. 2. Financial Planning helps in maintaining stability through a reasonable balance between outflow and inflow of funds. 3. Financial Planning ensures the support of investors in the provision of funds. 4. Financial Planning helps in prioritizing expansion programmes needed for long- run survival of the company. IMPORTANCE OF FINANCIAL PLANNING 5. Financial Planning reduces uncertainties brought by the changing market trends which can be faced easily through the establishment of enough funds. 6. Financial Planning helps to avoid hindrances to growth of the company by considering the capital requirements both for short term and future plans. STEPS IN FINANCIAL PLANNING Financial forecasts from the basis for financial planing. Forecasts are based on past performance of the firm which may not necessarily be repeated in the future. On the other hand, financial planning considers the results which the firm may like to achieve. Financial planning also covers the plan of action for the purpose of realizing what it desires. 1. Analysis of the firm’s earlier periods’ performance with a view to understand the firm’s core competencies and strengths and the effect of these on financial parameters. 2. Understanding the firm’s operation characteristics covering products, markets, competition, marketing strategies, and operation risks with a view to decide about the business portfolio and growth objective. 3. Determining the investment requirements of the firm and the available choices in view of the desired growth. STEPS IN FINANCIAL PLANNING 4. Estimating the cash flows i.e. revenues and expense and funds requirement considering the investment and dividend decisions. 5. Deciding the financing sources, i.e. debt or equity and selecting suitable methods for raising funds. Financial planning covers the firm’s profitability and growth in the long-term involving investment, financing and dividend decisions. Financial planning looks at the firm as a whole and not as an individual project, regarding the target capital structure and sources of finance PREPARING BUDGETS PREPARING BUDGETS Most organizations prepare budgets in evaluating the results of their operations by comparing the actual figures over the previous years. athe process of preparing a budget should be highly well-organized and should follow a set schedule, so that the completed budget is ready for use by the beginning of the next calendar UPDATE BUDGET ASSUMPTIONS The assumptions about the company's business environment that were used as the bases for the last budget has to be reviewed for necessary changes or updating.  REVIEW BOTTLENECKS This is to determine the capacity level of the primary bottlenecks that limits the company from generating further sales, and define how this will impact any additional budgeted revenue growth. AVAILABLE FUNDING This is to identify the amount of funding that will be available during the budgeting period, which may affect growth plans. COSTS CONSIDERATIONS This is to determine any costs that will be incurred by a range of business activity in the upcoming budget period and to define the amount of these costs at certain activity levels. CREATE BUDGET PACKAGE This is to provide the basic budgeting instructions from the instruction packet used in the preceding year. It is necessary to include the year-to-date actual expenses incurred in the current year, aside from annualized figure for the full current year. CREATE BUDGET PACKAGE An additional commentary to the packet is also needed like stating costing information, bottlenecks and expected funding limitations for the upcoming budget year. ISSUANCE OF BUDGET PACKAGE The budget package issuance includes the due date for the first draft of the budget package including where to ask possible question from the recipients. OBTAIN REVENUE FORECAST The revenue forecast distributed to other department managers is the one prepared by the sales manager and validated by the CEO. This revenue information is used as basis for developing all of the department's budgets. OBTAIN DEPARTMENT BUDGETS The submission of budgets from all departments is checked for errors, compared to the identified bottlenecks, indicated funding requirements, and step costing constraints. Adjustment of the budgets, if necessary, are coordinated with all concerned. OBTAIN CAPITAL BUDGET REQUESTS This is to summarize and validate all capital budget request supported by comments and recommendations for endorsement to the senior management team. UPDATE THE BUDGET MODEL This is to consolidate all budget information into the master budget model.  REVIEW THE BUDGET The review of the budget is done through a meeting with the senior management team. This is to highlight possible constraint issues, and any limitations caused by funding limitations. REVIEW THE BUDGET All of the comments made by the management team are forwarded back to the budget originators for appropriate modification. PROCESS BUDGET ITERATIONS This is to update the budget model of thr outstanding budget change requests through the new iterations.  ISSUE THE BUDGET All authorized recipients are issued with a bound version of the revised and appropriate budget  LOAD THE BUDGET Load the budget information into the financial software, to monitor implementation and generate budget versus actual reports. PREPARING BUDGETS The above steps are generally applicable to all business but it can be tailor fit into the requirements specifically to smaller business, where perhaps just one person is involved in the process. It is important that a budget will have to be prepared even without following the above stepsfor monitoring and control purposes. PROJECT FINANCIAL STATEMENT PROJECT FINANCIAL STATEMENT The project financial statements are representation of the financial picture of a firm through summarized current trends and expectations as of a future date. At a minimum, project financial statements will show a summary-level income statement and statement of financial position(balance sheet). This information is based from a revenue trend line, as well as expense percentages consistent with the current proportions of expenses to revenues PROJECT FINANCIAL STATEMENT The following are the features of a properly prepared Projected incorporate financial statements: 1 A statement of cash flow An expense projections including periodic costs that 2 remain more or less unchanged irrespective of the output level or sales revenue Consideration of the pace at which the business can 3 reasonably grow, based on its prior history PROJECT FINANCIAL STATEMENT The following are the features of a properly prepared Projected incorporate financial statements: Consideration of the corporate bottleneck 4 operation on the ability to grow The supporting information to attract investment 5 of funds needed to accomplish the financial results stated in the plan  “WITH GOOD PLANNING AND THE RIGHT STEPS, YOU CAN CREATE A BRIGHTER AND MORE STABLE FINANCIAL FUTURE” THANK YOU