Financial Planning for a Business

            Financial planning is a continuous thinking process or a blueprint for prudent allocation of resources in order to meet both long term and short-term goals. A financial plan gives a macro view of any business, which can be used by both internal and external parties to assess the financial wellness of any business. Business goals, a budget, savings plan, and investment plan are important components of a sound financial plan. For smooth operations to be realized, every individual or business must have this mandatory tool.

Financial Planning process

Achieving business success is not instantaneous but rather a well-calculated process with spot checks and remedial actions. This continuous process incorporates several steps.

Goals Clarification. According to Winger and Frasca (2002), In order to achieve any strategic targets, it is important to know where the business stands to avoid making ambiguous projections. Based on the financial cash flows and the ease with which credit facilities can be obtained, goals can then be established. Goals then must be specified such that any person can easily identify with the final product. For instance, an investment plan of purchasing new farm equipment should clearly state the type of machinery to be purchased, estimated prices, durability and output capacities.

Identifying hurdles. A financial plan does not operate in a utopian economy and therefore external shock must be identified and catered for. Economic shocks such as inflation and interest rates should be considered in any investment decision. All alternatives of cutting on cost while maintaining quality must be discussed (Winger and Frasca, 2002).

Evaluation of recommendations in the plan. This is a brainstorming session where all alternatives are brought forward, thoroughly discussed and the best option identified.

Implementing the plan. Having adopted the best plan of action in the previous step, this stage involves committing resources and following the laid down process to the latter.

Review. The plan should be reviewed on a regular basis to avoid veering off the target. Accommodating external shocks, which were not clearly captured, occurs in this final stage