WHAT IS FINANCIAL PLANNING

I hope all of you are aware about what is FINANCIAL PLANNING ? But let’s take a quick revise.

It is all about the preparation of a financial blueprint of an organisation’s future operations.

The objective of financial planning is to ensure that enough funds are available at right time. If appropriate amount of funds are not available then the firm will not be able to fulfill its commitments and will not be able to carry out its plans.

If excess funds are present, then we all know that it may add to the cost and may increase unnecessary expenditure. It must be kept in mind that financial planning is not similar to, or a substitute for, financial management.

Financial planning aims at smooth operations by focusing on fund requirements and their availability in the light of financial decisions. Financial planning process tries to forecast all the items which are likely to undergo changes. It enables the management to forsee the fund requirement both the quantum and timing.

We can understand the objectives of financial planning is brief,

The two main objectives of financial planning are-

1) It ensures that enough funds are present for the use in firm so that operations and other money oriented activities are not harmed and also keeps a check on the part that the funds are available when needed.

2) As financial planning is mostly considered as a tool to maintain funds, it can be also used to ensure that firm do not raise unnecessary funds that can reverse the profit( increase cost).

As business is about operating in short term or long term we can say that financial planning also depend on time periods.

A long term planning aims to achieve long term goals like increasing monopoly or increasing growth of firm.

Whereas, a short term plan is always characterized by a budget or we can say that a short term plan is called as budget, it includes all expenses and sources available for a year. mostly planning is done for 3 to 5 years in long run.

Therefore, we can ultimately say that financial planning for an organisation is very useful becausew it helps the firm to operate properly as well as reduce costs. It is like a blueprint of firm’s future operations.

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