FINANCIAL PLANNING

PM October 2010

FINANCIAL PLANNING
A comprehensive evaluation of an investor's current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans. Most individuals work in conjunction with an investment or tax professional and use current net worth, tax liabilities, asset allocation, and future retirement and estate plans in developing the plan. These will be used along with estimates of asset growth to determine if a person's financial goals can be met in the future, or what steps need to be taken to ensure that they

FINANCIAL PLANNING BUSINESS

Anyone who beings business should have a basic idea of what financial planning is all about. It is very important for the business owner for the following reasons: Most business owners are responsible for setting up and tending their own retirement plans. One cannot decide how to invest money unless you have planned to deal with debt, cut expenditures, and save. This means setting goals and sticking to them as well as keeping good records. The financial aspect of any business is vital to that businesses survival. Trying to succeed without proper organization and management of the finances will cause the business to fail. Having a sound financial plan for the your business allows to estimate profits, project sales and the amount it will cost to run the business. This information is essential to run the business. The foundation of any sound business plan is having a mix of different kinds of investments including stocks, bonds and fixed-income vehicles, thereby increasing the invested savings by managing the risk.

FINANCIAL PLANNING - IMPORTANCE

Cash Flow.

Savings

Capital

Assets

Importance of Financial Planning

Income

Financial Understanding

Family Security

Investment

TYPES OF FINANCIAL

PLANNING

The objective of an organisation can include the following objectives:

Maximise profit Maximize shareholder value Minimise costs Maximise Revenue Increase market share. Therefore an organisation need to do : Long term strategic planning Short term tactical planning.

LONG TERM STRATEGIC PLANNING

Long term strategic planning is also known as corporate planning involves selecting appropriate strategies so as prepare a long term plan to attain the objectives. Characteristics:
Time span depends on the organisation ( 2,5,7 years or longer) Detailed, lengthy and incorporate the following stages.
Assessment stage Objective stage Evaluation stage Corporate plan

SHORT TERM TACTICAL PLANNING

Long term plan though serving as the long term framework needs to be converted into a series of short term plan usually for an year for the operational purpose. For a short term tactical plan, it is necessary to have long term strategic planning and as each short term plan steers the organization towards the long term objective.

PLANNING AND CONTROL

Financial Control is the management of the firms actual cost and growth with the planned/ budgeted. The process of control also involves the study behind the deviations and rectification there on. Thus financial control involves: Setting performance targets. Measuring performance. Comparing performance against target. Analysing variances and taking remedial actions.

SUMMARISE:
Planning and Control and the Long Term Strategic Plan Planning:

Identify Organization Objectives and Short-Term Goals Develop Long-Term Strategy and Short-Term Plans

Control:

Measure and Assess Performance Re-evaluate Objectives, Goals, Strategy, and Plans