The 4 keys to financial planning: objectives, deadlines, budget and control of decisions
by TM Maria Be a king in your own kingdomThe financial planning is the process of development of an
organized, detailed and personalized comprehensive financial plan that
guarantees achieving certain financial targets previously, as well as
deadlines, costs and resources needed to make it possible.
In other words, financial planning defines the direction an
organization must follow to achieve its strategic objectives through a harmonic
action of all its members and functions. Its implementation is important both
internally and for third parties who need to make decisions related to the
company (such as the granting of credits, and the issuance or subscription of
shares).
It is necessary to clarify that financial planning can not
only refer to certain financial projections that the financial statements of
results and balances of a given indicator show, but also includes a series of
activities that are developed at different levels: strategic level, functional
level and operational level of a company.
This concept was born in the United States in the early 70s,
in response to the need to take into account all aspects that may influence the
finances of a subject, be it a person or company.
The financial planning process comprises four stages:
1.
The establishment of the objectives pursued and
their priority.
2.
The definition of deadlines to achieve these
objectives.
3.
The elaboration of the financial budget, that
is, the identification of the different items necessary to achieve satisfactory
results: investment in fixed income, variable, selection of funds, pension
plans, etcetera.
4.
The measurement and control of financial
decisions taken to avoid deviating from the route that leads to the objective
or objectives.
The planners and financial advisers themselves are in charge
of preparing this plan, adjusted to the interests of the subject in question.
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Outputs
The output of the financial model consists of financial
statements, such as income statements, balance sheets and statements that
indicate the origins and applications of the treasury. These states are called
pro forma, which means that they are forecasts based on the inputs and
hypotheses on which the plan rests. In general, exits from financial models
also include many of the financial ratios. These ratios indicate whether, at
the end of the planning period, the company was in conditions of financial soundness
and health.
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Created on Apr 27th 2019 11:53. Viewed 395 times.