Financial planning is a very powerful managerial task that
lays down a very basic and much needed foundation to keep a business healthy
and promising. Most, if not all, small and medium sized businesses engage in
financial planning. It is worth checking, however, if they are doing it right
to ensure that they achieve success.
There are multiple tools for financial planning available in
the market today, but there is a need to explore them deeply to know if they
serve a company’s demands. As for techniques, there is also a wide array to
choose from. It is just a matter of identifying which ones will work best with
the kind of business that executives and owners run.
Researching about the best techniques and the most reliable
tools available in the market today is the wisest thing to do if your business
intends to invest in an innovative technology that will empower your brand to
reach greater heights. Before you can optimize financial planning, you need to
first understand what it is and what it can do for your business.
What is Financial Planning for a Business?
Financial planning allows a business to see if it can afford
to accomplish its set goals and objectives. A financial plan is created to
support the goal that businesses target to achieve. It contains the various
resources needed and where and when they will be spent.
The financial planning process is quite extensive and
requires a lot of attention to details, but the rewards and benefits are very
fulfilling in the end. It begins with the creation of the vision and objectives
of the business, followed by evaluating the business climate and the company's
priorities, identifying the resources needed to meet the objectives, and
assigning costs.
These steps are followed by quantifying the resources
needed, creating the budget, identifying potential risks involved in the
budget, and establishing a timeline. Finally, the process ends with the
creation of a full-blown financial plan that puts together everything.
To put everything together, it will help to use an effective
software program such as those available at several digital solutions providers
such as Workday, a company that helps other businesses turn ideas into reality,
find new sources of revenue, and empowers users to make more time for things
that matter most.
Why is Financial Planning Important?
It is very important because it compliments the entirety of
a business plan and confirms that the business objectives are indeed
achievable. It reviews the financial situation of a business and lays down all
key elements critical to the realization of the goals. A well-prepared
financial plan enables businesses to manage their cash flow for several months
even when revenue is a bit slow at the beginning.
What are Financial Planning Benefits?
So what are the benefits of financial planning for your
business? Here are some clear advantages you shouldn’t ignore:
1) Better Risk Mitigation
A well-planned and
effective financial plan strengthens your risk mitigation efforts, enabling
your business to detect and navigate financial fraud effectively and survive an
economic crisis. Digital tools will help you identify areas of your business
where you can draw out a surplus to set aside for emergency expenses. Being
able to anticipate possible scenarios that will put your business at risk is a
wise move. If you are ready for these kinds of situations, the survival rate of
your business is high.
2) Sturdy Cash Flow Management
A digital financial
planning solution can help you develop a reliable cash flow management system
that monitors the money coming in and out of your business. As can be expected,
the spending will be bigger than the earning at the beginning as you need to
establish yourself first. Keeping track of your cash flow is key in achieving
success in business and without finance experts on board to help you do this, an
efficient digital solution would be more than enough.
3) Clear Company Goal
A realistic and thoroughly discussed plan gives your business a concrete direction long-term. You have a clear blueprint of how to get there and have strategies in place for when you encounter bumps along the road. One of the real tests of an effective leader is being able to prepare for any kind of scenario in the future.
4) Much Needed Cost Reductions
A well-established
financial plan allows you to see redundancies, which can lead to necessary cost
reductions so you can realign funds elsewhere. Working within a budget develops
the discipline your company needs in order to stay financially healthy. You
only pursue those which you can actually afford and stay clear of those that
you cannot.
5) Smart Budget Allocation
Knowing how to spend
your money wisely is an important leadership attribute. With help from a
reliable digital solution, you can easily identify key areas that need budget
allocation to run your business strategically.
Components of a Successful Financial Plan
A successful financial plan is a combination of key elements
that will empower business executives to take their brands to the next level
through careful planning and execution. Effectively maximizing these elements
contributes greatly in the formulation of a solid plan.
1) Carefully crafted operations plan
An intact operations plan is one of the most important
byproducts of a financial plan. It outlines how you will conduct your business,
identifies the human resources needed, and logistics, among others. Of course,
all within the bounds of a set budget so that the business will stay afloat.
2) Realistic sales forecast
A digital financial planning solution can create a realistic
sales forecast for you considering all the elements involved. You will see your
potential to earn and can forecast sustainability. It will also reveal areas
where you can still earn and aspect of your business that might eat up a huge
part of your budget.
3) Break-even analysis
This is a computation of comparisons between your income
from sales and the actual cost of conducting your business. Are you making
enough money to sustain your operations? If the answer is yes, then you are
safe. Otherwise, you might need to rethink some areas in your operations.
4) Full expense plan
A full expense plan will show you regular expenses, your
future expenses, and associated expenses. Your regular expenses include
operational costs such as rent and payroll. This can easily be generated using
a software that can give you real-time computations. Keeping tabs on your
company’s day-to-day expenses is very important to determine if your finances
are still healthy.
5) Projected cash flow
A sound financial plan can do predictive cash flow. This is
easily possible if you invest in a reliable and effective financial planning
digital solution that has been proven to make business operations easier and
faster. A digital solution that can generate this will help a business stay
ahead of the competition.
6) Financial statement
An effective financial management system should be able to
generate regular financial statements so executives can monitor the financial
health of the company. Financial statements are very helpful for decision
making and making future plans.
Improve Planning with a Financial Management System
A tested and proven financial management system that works
such as the Workday Adaptive Planning solves a lot of financial planning
challenges for businesses that want to spend more time executing plans rather
than making them. Workday Adaptive Planning is carefully designed to get rid of
static systems and gives users more time to plan, budget, and forecast with
agility.
The program’s key capabilities include rolling forecasts,
top-down and bottom-up budgeting, incremental and zero-based budgeting, and
driver-based expense planning. Rolling
forecasts are crucial as they give users a continuous picture of the business
so they can make real-time critical decisions when variances occur. Top-down
budgeting, on the other hand, sets targets that are based on executive
guidance, while bottom-up operational plans can be developed with cost center
managers.
Meanwhile, incremental and zero-based budgeting builds plans
on historical data using intelligent planning abilities or simply restart for
the next fiscal year. Finally, driver-based expense planning creates expense
plans that can benefit many types of businesses. It can also perform expense
allocations using Workday’s built-in rules engine.
With Workday Adaptive Planning, you can run multiple scenarios, plan across any time
horizon, budget the way you want, increase collaboration and adoption, and
connect all your systems at the same time through seamless integration with
other back-end enterprise solutions.
Having an effective and highly reliable forecast mechanism
is a powerful tool to have for any kind of business. Optimizing this financial
planning tool can be a game-changer and empower business organizations to grow
in leaps and bounds. Moreover, state-of-the-art forecast systems will give
business executives a lot of solid data to work on when planning future goals.
Thanks to Workday, executives can turn to a trustworthy program that does all
the hard work for them.
Learn more about Workday Adaptive Planning and how it can
benefit your business by visiting the Workday website.
