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 objectives 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 time frames 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 number of resources (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.
The role of financial planning includes three categories:
- The strategic role of financial management
- Objectives of financial management
- The planning cycle