Financial planning: the procedure for organizing and operating an enterprise

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:43

Financial planning is the management process of creating, distributing and using financial resources of a business entity. This process is a structural element of the entire planning process created by enterprise managers.

In the conditions of modern management, when the principles of independence of organizations and responsibility for the results of their own activities must be fully implemented, financial planning is of particular relevance. Without it, it is impossible to achieve significant success in the market, expand production and economic activities and the sociological development of the team.

Financial planning is closely related to the planning of the company's production activities. After all, the main indicators are based on the volume of production, cost and product range. This process contributes to the determination of internal reserves at the enterprise and the observance of the economical regime. Obtaining the planned profit is possible subject to compliance withpredicted labor and material costs. Accurate planning allows you to avoid excess stocks of material resources, the need for unscheduled cash investments and non-production costs. Also, thanks to planning, favorable conditions are created for the efficient use of production capacities and, accordingly, 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. This process is responsible for the effectiveness of activities in subsequent periods.

Based on research in this economic area, specialists have identified the following types of financial planning: forecasting, current and operational planning. All three types are necessarily found in the activities of the organization.

Financial planning is carried out in a clearly defined sequence. Thus, the initial stage is forecasting, which determines 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 of each type of financial plan must be determined by the organization independently, taking into account the specifics of its functioning.

Also distinguish between long-term and short-term planning. The long-term takes into account the adoptiondecisions related to the acquisition of fixed capital, the definition of the range of products manufactured by the enterprise, and personnel policy.

However, a common option in any enterprise is short-term financial planning, usually covering one year. The annual budget, in turn, is divided into quarterly and monthly plans.