Define financial planning
Financial planning is the planning that is implemented for a long-term period; In order to achieve financial profits based on obtaining returns greater than the value of assets, with an increase in the growth of their market share, Financial planning is defined as the activity that contributes to making decisions related to the way individuals manage their financial rights, and financial planning includes a set of aspects , the most important of which is the preparation of the financial budget, planning for taxes, saving money, and others.Another definition of financial planning is the preparation of a program that helps manage capital and financial affairs; By linking it to the preparation of a financial budget.
Financial planning objectives
Financial planning seeks to achieve two goals:
Ensuring the provision of money: is the primary and first objective of financial planning; It is important to have enough money in the company; In order to carry out many activities and tasks, such as obtaining long-term assets, covering daily expenses, and ensuring the availability of financial financing in a timely manner.
Not to use and waste the company’s resources unnecessarily: It is the second objective of financial planning, which is related to the excessive financing of resources, which is similar to the shortage or insufficiency of money. In the event of a financial surplus, it is important to implement good planning for the investment of these financial resources; By taking advantage of them in the best possible way, and avoiding wasting them, which may lead to a large financial loss for the company, and the financial planning of facilities is applied over a short or long period of time. Long-term financial planning focuses on capital spending, and short-term financial plans are called budgets, and they contain a special business plan that is prepared for a fiscal year or less.
The importance of financial planning
Proper financial planning is one of the means for the success of commercial projects, and its importance includes the following points:
Preservation of funds: It is the assessment of financial planning for the appropriate needs while dealing with money, which contributes to avoiding its waste and loss in cases of excessive capital.
Helping to choose the appropriate capital structure: by participating in arranging funds from various sources, and used in the short-term, medium-term, and long-term periods. Financial planning is necessary to take advantage of the sources of money at the appropriate times; As long-term funds are obtained from bondholders and shareholders, medium-term funds are collected from financial institutions, and short-term funds are private funds in commercial banks.
Contributing to the financing of projects: It is the development of financial planning for a financing plan that helps determine how to use private funds in projects, which is based on a comparison between different proposals for investment.
Participation in operational activities: is the role of financial planning in achieving the success or failure of the functions of enterprises, such as distribution and production during the implementation of the business; By relying on sound financial decisions that ensure proper financing and operation are promoted.
Strengthening financial control: providing financial planning a basic basis that contributes to the examination of financial activities; In order to compare actual and estimated revenues, with estimated and actual costs.
Helping to avoid commercial crises: It is a means of financial planning that provides assistance to establishments; In order to bypass or avoid crises and surprises that negatively affect the work environment.
The link between the present and the future: is to provide a follow-up to the current requirements for the funds of the enterprise, with the requirements expected in the future; By setting a set of expectations and plans that seek to support the company's growth and sales development.
Financial planning stages
Financial planning depends on the application of a set of stages:
Defining the relationships between clients and planners: It is the first stage of the financial planning stages, and it depends on the role of the financial planner in documenting all the services that will be provided to clients, which contributes to strengthening the agreement between the financial planner and the client on how to make decisions.
Collecting private data on clients: It is the role of the financial planner in obtaining appropriate and private data on each client; Which contributes to determining the financial status of all clients, the nature of their risk-taking attitude, and their personal goals.
Assessment of the clients’ financial situation: It is the third stage of financial planning, and it depends on the analysis of clients’ private information; In order to assess their financial conditions, and determine the things that must be done to achieve the goals, this assessment includes an analysis of the client's financial assets, liabilities and expenses, investments or tax requirements.
Providing recommendations or alternatives to financial planning: It is the financial planning to present recommendations that contribute to addressing the special goals in clients; By relying on their information, which contributes to providing assistance to the financial planner; So that he can review recommendations that allow the client to make the right decisions.
Implementation of recommendations related to financial planning: It is the penultimate stage of financial planning, in which agreement is reached between the financial planner and the client on the way to implement the recommendations; It is possible for the planner to train the client on these recommendations, and then coordinate their implementation with him.
Monitoring recommendations for financial planning: it is the last stage of financial planning; Through it, an agreement is reached between the client and the financial planner to implement the control over the implementation of the objectives, whether through the client or the financial planner.
Factors affecting financial planning
There are a number of factors that affect financial planning, the most important of which are:
Human factors: They are the factors related to individuals within the establishments, and their impact depends on the application of a set of issues, the most important of which are:
Selection of qualified, qualified and experienced manpower to ensure the achievement of the required objectives.
Providing training that contributes to supporting the skills and knowledge of employees.
Technical factors: are the integration between financial planning and contemporary technological techniques, which leads to more effective implementation of activities, support for obtaining profits and reduce the amount of costs and losses.