G3

• Financial planning is the process of estimating the capital required and determining its competition. It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise.
• Objectives of Financial Planning


  • Determining capital requirements
  • Determining capital structure
  • Framing financial policies with regards to cash control, lending, borrowings, etc
  • Ensuring scarce financial resources are maximally utilized in the best possible manner at least cost in order to get maximum returns on investment
• Importance of Financial Planning Process


  • Helps stay prepares for emergency
  • Helps in calculating the right insurance cover
  • Better tax planning
  • Attain peace of mind
• Financial Planning Process


  1. Define Financial Objectives

  2. Gather and Analyze Data

  3. Forecast Future Performance

  4. Prepare Budgets

  5. Implement the Plan

  6. Monitor, Review, and Adjust
• Financial Forecasting


  The process of estimating or predicting future financial outcomes for a business or individual based on historical data, current market conditions, and various assumptions
• Purposes of Financial Forecasting


  • Strategic planning
  • Budgeting
  • Investor relations
  • Risk management
  • Performance evaluation
• Budgeting


  A systematic process of planning and controlling finances within an organization. It involves creating detailed financial plans, allocating resources, and setting targets to track performance and achieve organizational goals.
• Importance of Budgeting


  It is a plan that shows you how you can spend your money every month. Making a budget can help you make sure you do not run out of money each month. A budget also will help you save money for your goals or for emergencies.
• Characteristics of Successful Budgeting


  • The Budget Must Address the Enterprise's Goals
  • The Budget Must be a Motivating Tool
  • The Budget Must Have the Support of Management
  • The Budget Must Convey a Sense of Ownership
  • The Budget Should be Flexible
• Budget


  • Must convey a sense of ownership to the people responsible for implementing it
  • Should not be imposed on the people responsible for implementing it
  • People responsible for implementation must have necessary input into the budget's development
• Budget


  • Should be flexible
  • Permits an enterprise to go ahead with strategically important plans
  • Permits an enterprise to carry out essential unplanned and unforeseen large maintenance works
• Budget


  • Should be a correct representation of what is anticipated to happen
  • An inaccurate budget will not have the support of the managers and employees directly affected by it
  • An inaccurate budget encourages managers to fabricate "budgetary slack"
• Budget


  • Must be coordinated to smoothly operate within the different business units of an enterprise
  • Requires a prudent coordinated effort to set up credit standards that both sales and credit managers can profitably support
• Using a budget in accounting can help a business or individual save money by sticking to strict spending rules
• Budgets


  Can be simple spreadsheets or organized with accounting software
• The key to making a budget work is learning to understand the numbers and sticking to the budget throughout the year
• Budgeting in Accounting


  • Helps track costs and income in a more organized way
  • Budgets can benefit businesses of all sizes
  • Most businesses utilize a budget to keep finances organized and make tax filings simpler
• Types of budgets in Accounting


  • Basic budget
  • Short-term budget
  • Fixed budget
  • Cash budget
  • Flexible budget
  • Functional or operation budget
  • Master budget
  • Performance budget
  • Static budget
  • Labor budget
• Budgeting process


  1. Forecasting income

  2. Estimating expenses

  3. Setting financial goals

  4. Allocating resources accordingly