Planning the needed finances for activities, resources, equipment and materials that are needed to achieve an organization’s objectives.
Financial planning is one element of financial management. It 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 timeframes involved.1
PURPOSE & LINK TO INTEGRITY
A company with sound financial planning is less likely to find itself in liquidity crises where vulnerability to illicit behaviour is increased (e.g. bribing in exchange for contracts; accepting credits from dubious sources, etc.). Furthermore, financial planning delivers a reference point to which the actual financial development of the organization can be compared. In this comparison, mismatches can point to possible illicit practices.
- Does your organization have staff members who are trained and experienced in financial planning?
Elements of short-term planning are:2
- Liquidity planning: the goal of liquidity planning is to be solvent at all times and to evaluate short-term financial requirements.
Elements of long-term planning are: 2
- Balance sheet forecast are used to assess the current and future financial situation.
- Forecast of income statement to identify future earnings prospects.
- Key financial figures are used to calculate the various key financial figures and is supported by your income statement and balance sheet forecast.
- Cash flow statement forecast serves the purpose of monitoring capital expenditure and financing movements, development of future «free cash flow», determination of long-term financial requirements.
- Capital expenditure planning includes necessary capital expenditure, time schedule, and necessary financing requirements
- Budget controls help to determine whether the budgeted figures have been achieved
KEY GUIDING DOCUMENTS
SME Toolkit, no year, Financial Management & Reporting, SME Toolkit, http://www.smetoolkit.org/smetoolkit/en/category/918/Financial-Management-Reporting, accessed 04.12.2015
SME Corporation Malaysia, 2011, Financial Guide for SMEs, SME Corporation Malaysia, http://www.smecorp.gov.my/vn2/sites/default/files/Financial%20ENG.pdf, accessed 04.12.2015
Ingram, D., no year, Business Financial Plan Basics, Small Business Chron, http://smallbusiness.chron.com/business-financial-plan-basics-495.html, accessed 04.12.2015
BalanceTrack, 2010, Financial planning, BalanceTrack, http://www.balancetrack.org/FinancialPlanning/index.html, accessed 04.12.2015
Korah, G., 2009, Good Financial Management for SMEs, Korah & Korah Chartered Accountants, http://www.korahandkorah.com/articles_sme.html, , accessed 04.12.2015
- Wikipedia, no year, Financial planning (business), Wikipedia, http://en.wikipedia.org/wiki/Financial_planning_%28business%29, accessed 04.12.2015
- Startups.ch, no year, Die Finanzplanung, Startups.ch