Financial planning is the management process of creating, distributing and using the financial resources of a business entity. This process is a structural element of the entire planning process created by the managers of the enterprise.
In the conditions of modern business, when the principles of the independence of organizations and responsibility for the results of their own activities should be fully implemented, financial planning is of particular relevance. Without it, it is impossible to achieve significant success in the market, to expand production and business activities and the sociological development of the team.
Financial planning is closely linked with the planning of production activities of the company. After all, the main indicators are based on the volume of production, cost and range of products. This process contributes to the determination of internal reserves at the enterprise and compliance with the economic regime. Obtaining the planned amount of profit is possible subject to the predicted labor costs and material costs. Clear planning allows you to avoid over-supplies of material resources, the need for unplanned cash investments and non-production costs. Also, thanks to planning, favorable conditions are created for the efficient use of production capacities and, consequently, for the improvement of product quality.
So, financial planning is represented by the process of forming a system of measures aimed at ensuring the development of the organization with some financial resources. The specified process is responsible for the effectiveness of activities in subsequent periods.
Based on research in this economic sphere, specialists have identified the following types of financial planning: forecasting, current and operational planning. All three species are necessarily found in the activities of the organization.
Financial planning is carried out in a clearly defined sequence. So, the initial stage is forecasting, which defines the tasks of the current planning of the company’s activities, which, in turn, creates the basis for in-depth and detailed operational forecasting of its activities.
The level of detail of indicators for each type of financial plan should be determined by the organization independently, taking into account the specifics of its functioning.
Also distinguish between long-term and short-term planning. In the long-term, the adoption of decisions related to the acquisition of fixed capital, determination of the range of products manufactured by the enterprise, and personnel policy is taken into account.
However, a common option in any enterprise is financial planning for the short term, usually covering one year. The annual budget, in turn, is divided into quarterly and monthly plans.
