Developing the financial plan
Posted by admin on Feb 15, 2009
A financial plan is a course of action for obtaining and using the money that is needed to implement the goals of the business organizations. Once the plan is in actionm the performance of the organization is monitored and evaluated in terms of the attainment of the goals. Just like any other plan, financial planning should be flexible and realistics.
Here are three steps involved in financial planning.
establishing objectives these should be clear and specific to determine their cost or budget. Objectives should be realistic. That is they can be supported by available resources in terms of human, material and financial inputs. Otherwise, such objectives are not attainable.
Budgeting. A budget is an estimated or projected program of expenses and incomes over a specified future period. Incomes come from estimated sales while expenses are based on both fixed and variable costs of operations of the business, like salaries, rentals, materials, taxes, payments of water, electricity and others.
Identifying sources of funds. There are four primary types of financing a business enterprise. It can be an income from sales, or the owner’s money and sale of shares of stock. Borrowing from friends, relatives and financial institutions and issuing bonds and sale of some property of the enterprise as a last resort.