Financial planning is the task of determining how a business will afford to achieve its strategic goals and objectives. Usually, a company creates a Financial Plan immediately after the vision and behavior have been set. The Financial Plan describes each of the activities, resources, equipment and materials that are needed to achieve these objectives, as well as the timeframes involved. The Financial Planning activity involves the following tasks;- * Assess the business environment Confirm the business vision and objectives * Identify the types of resources needed to achieve these objectives * Quantify the amount of resource (labor, equipment, materials) * Calculate the total cost of each type of resource * Summarize the costs to create a budget * Identify any risks and issues with the budget set Performing Financial Planning is critical to the success of any organization.
It provides the Business Plan with rigor, by confirming that the objectives set are achievable from a financial point of view.
It also helps the CEO to set financial targets for the organization, and reward staff for meeting objectives within the budget set.
The role of financial planning includes three categories: 1. Strategic role of financial management: 2. Objectives of financial management: 3. The planning cycle: Strategic financial management refers to study of finance with a long term view considering the strategic goals of the enterprise. At the most fundamental level, financial management is concerned with managing an organization’s assets, liabilities, revenues, profitability and cash flow.
Strategic financial management goes a step further in ensuring that the organization remains on track to attain its short-term and long-term goals, while maximizing value for its shareholders.
Strategic financial management also means that short-term goals may occasionally need to be sacrificed to meet longer-term objectives. A typical example is when a loss-making company trims its asset base through factory closures or headcount reduction in order to reduce operating expenses.
While such actions have a detrimental ffect on near-term results because of restructuring costs and other one-time items, it positions the company to achieve profitability in the longer term. Strategic financial planning is an investment framework used to accomplish your particular financial goals. There are a number of factors that may influence how you carry out your investment plans and may ultimately help you decide how to move your money in your portfolio to increase the likelihood of favorable returns. Planning One of the basic tasks of strategic financial planning may involve planning your investment framework to meet long- and short-term financial needs. This framework may include deciding how much money to invest and which securities to invest in.
Assets * You may choose from a wide variety of investments for your portfolio. Common investments include stocks, bonds, mutual funds, certificates of deposit, money market accounts. Each of these investments has its advantages and disadvantages in terms of risk and returns Risk Generally, investments of all kinds carry varying degrees of risk. Equity investments like stocks are typically riskier in comparison to certificates of deposit at your local bank. If your investment is guaranteed by the federal government, the risk of loss is practically eliminated. Evaluation*
A part of strategic financial planning includes estimating how much money your investments will make and tracking progress. If you have a particular return rate in mind, you may want to optimize your portfolio to include investments most likely to meet your earnings goals. Information There are large amounts of information from financial institutions, company annual reports and corporate filings with the Securities and Exchange Commission. You can analyze the financial condition of your investments and determine whether your current strategy is working in your favor. Through research, you may be able to find badly managed companies, unsuccessful funds and other threats to your financial strategy One of the key environmental elements driving the interest in, and value of, rolling strategic plans is the abbreviated time horizons that healthcare leaders now face.
The condensed planning cycle is a result of many factors in the market, including increased competitive pressures, heightened scrutiny by the public and the press, and the general high-profile status and challenges of the healthcare sector. Health care is consistently in the media headlights and, according to polls, on the public’s mind. It is viewed by many as both problematic and emblematic—a reflection of the high costs and diminishing access that increasingly frustrate and perplex the country, collectively and individually.
Consequently, calls to address the problem and initiate change can be heard from all sides, including employer groups and political figures, resulting in federal and state legislation and regulation and other high profile efforts to improve the system. Onewell-known example is Massachusetts’ decision to provide health insurance for all its residents. Another is the recently announced rebasing initiative, in which the Centers for Medicare and Medicaid Services is recalibrating diagnosis related groups for the inpatient prospective payment system.
Dynamism in the DetailsThe painful reality of many strategic plans is that, once completed, they sit on the shelf for months—even years—until it is time to pull them down, dust them off, and start the planning process once again. This process is not so much strategic planning as organizational window dressing, and expensive window dressing at that. For a plan to be truly effective, it needs to be dynamic and fluid. One of the great benefits of a perpetual planning process is that it makes the plan itself an integral part of the organization’s strategic direction and longrange approach.
Even the individual tactical components remain prominent on the radar screens of both senior executives and mid-level managers. One of the criticisms of traditionalplanning, with its “looks good, see you in a year” approach, is that it is too blue-sky or high level; the wide chasm between purporting and reporting means that excitement and attention are dissipated. The natural tendency in any industry is to get caught up in the pressing issues of the day and leave the longer-range issues and projects for an increasingly distant tomorrow.
Typically, when that tomorrow finally rolls around, there is much 11th hour scrambling, complete with patchwork efforts and slipshod performance. With a robust perpetual planning process, in contrast, the emphasis on accountability and progress and the frequent reporting and analysis of established metrics keeps the organization focused, its feet on the ground. If senior-level executives know they are going to be called on to provide periodic updates, they are much more likely to require accountability from their mid-level managers on the projects under their purview. That sense of urgency will permeate the organization.
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