Cooperate Financial Planning - Essay Example

Cooperate Financial Planning (Name) (Institution) Introduction Cooperate financial planning can be defined as the practice of determining the financial needs of a company as well as planning for the future goals that need to be achieved. The processes involve making decisions about activities and investments that are appropriate and need to be carried out by the company or institution economic environments. The financial planning process can take the approach of short-term financial plans, medium term financial plans or long-term finical plans (Ehrhardt & Brigham, 2009). A financial plan prepared for a maximum of one year is considered short-term financial plan and is mainly considering the needs for the company working capital. Cooperate financial plans that take between one to five years is considered medium-term financial plans, and is concerned with the maintenance and replacement of the company or institutional assets as well as research and development (Greenwood, 2002). Consequentially, long-term cooperate financial plans take more than five years, and the main aims are to take care of the long-term financial objectives of the company, investments, and capital structure. Mathematically, cooperate financial planning can be formulated as the sum of financial resources and financial techniques. The planning process seeks to answer questions on the financial status and requirements for the company, the source of finance such as capital owned, borrowed capital and how the company will spend the acquired finances (Greenwood, 2002). The aim of this tasks is to establish a good understanding of cooperate financial planning that are aimed at making businesses or institutions to succeed in terms of revenue management. Creating an effective cooperate financial planning process Every business or institution irrespective of their maturity and size must have a financial plan as a tool for making decisions, management and for the stakeholder to evaluate the progress of the investment. Every business operation is unique in its way, with different goals and objectives that need to be met; different financial plans are prepared depending on the nature of the business. A business can have an option of creating an independent or tailoring a general financial plan that will fit the business requirements. Preparing the plans can be a challenging activity as the business or the institution tries to establish the elements that will create a specific financial plan and to assist in the process of monitoring and plan follow-up (Ehrhardt & Brigham, 2009). Cooperate financial planning can, therefore, be defined as the strategies that the finance department consider as first priority in meeting the business financial goals and mission. The planning process can as well be termed as strategic planning that focus on the responsibility and staff procedures (Henderson, 2011). Financial planning requires the business to look at the areas of weaknesses, the company mission and aims that need to be accomplished within a specified time. Cooperate financial planning can also be categorized as operational planning and financing planning. The focus of operational planning is to plan for the cost of production and the sales returns. On the other hand, financial planners are mostly interested in knowing how the revenues are operating within the set activities. The understanding of the two cases can take a single approach to financial planning that comprises both the financing and financial operations (Greenwood, 2002). Strategic planning is the foundation of cooperative financial planning. The influence of strategic decisions is known to have financial indications. Therefore, the planning method must begin with the budgeting, which exists within the calculated planning process. The importance of linking strategic planning process and budgeting is to avoid the budget failure and making unplanned expenditures. The need for strategic planning is to set financial goals and objectives for the business operations (Chandra, 2010). The planning process comprises of developing a mission statement that are consistent with the purpose and the existence of the organization and correspondingly to put plans in place for the organization success. Financial planning strategic objectives and goals are developed depending on the organizational external and internal environmental assessment. The implementation of the financial planning is developed by designing an operation or action plan that will guide revenue expenditures (Lee et al., 2009). An effective cooperate financial planning should stake the approach of bottom-up management method. This is whereby the finical planner starts planning from the ground by setting goals and gathering information and intuition from all corners of the business (Capon, Farley & Hulbert, 2009). The information collected can help the business to understand the competitors and know how to introduce its products in the market segment. The process also focuses on the external and internal financial factors that enable it to create a baseline for focusing on profits, market shares, and investments. Cooperate Financial Planning Process The financial planning process is aimed at considering the critical stages that are aimed at providing long-term financial plans for the business. The plan is developed depending on the financial requirements and information gathered from the existing departments. The information gathered is important for creating an effective financial plan that consider the entire scenario and capture the market opportunities and other resources that will improve the business operations (Ehrhardt & Brigham, 2009). The most appropriate financial planning process is a continuous process that can successfully sustain the business through planning, strategizing and operating stages. The first phase in cooperative financial planning is to carry out financial enhancement and collaboration of the business line. The aim of the paper is to deliver a good guidance to the enterprise in supporting the financial investments according to the business strategies. The solution for cooperative financial planning is related to the long-term plans made in the budget (Lee et al., 2009). The second stage is to shorten the financial planning cycles. The planning can be implemented by creating a central planning system that integrates cooperative financial planning solution concerning the business and financial implements. Shortening the planning cycle will safeguard real-time data from the business information realized from the long-term planning activities. Some of the factor to consider in shortening the financial planning cycle is through re-planning for continuous long-term plans by updating projection with actual plans (Henderson, 2011). The planner can also ensure the finance and the stakeholders have a good understanding of the repercussions of the investment plans. Shortening the planning cycles call for the planner to sidestep the creation of fixed plans, instead, apply the information gathered to develop the business financial plans. The third stage is the optimization of plans with the ‘what if ‘consequences in mind. The planning process should provide scenario, plans necessary for supporting and evaluation of the prioritized contingency plans that meet the organization requirements. The plans to be developed should adopt to the changing trends of the business (Capon, Farley & Hulbert, 2009). The financial plans should be in a position to point out the investments that are in accordance with the business goals and objectives with regards to the available capital. Consequentially, cooperative financial planning requires the planner to get visions into the performance of the investment. The finance performance can be realized from the previous data of the organization or the institution (Chandra, 2010). The acquired facts can then be used to establish a cooperative finical planning that is easy to integrate into the existing financial systems. The evaluation process of planned, spent and actual revenues should be investigated to create a transparent and accurate finance allocation (Lee et al., 2009). The final stage is to improve data accuracy and financial accountability. The primary challenge in cooperative financial planning is lack of accurate data and failure of the departments to account for the revenues allocated to the departments. An effective cooperative financial planning can provide an appropriate solution that will help mitigate the lack of accountability (Henderson, 2011). With accurate data and financial accountability, the business can realize improved prioritization of investment plans by carrying out an assessment of corporate objective. The figure below summarizes the cooperate financial planning process. Cooperate financial planning is important in improving the accuracy and accountability of the completely financial planning process. The organization is able to realize the business financial investment and performance by keeping the budget on the right track. The contributing factor to the lack of financial accountability is lack of communication, lack of management support to the finance department and making predicaments on some activities that are most likely to fail (Chandra, 2010). The challenges can be managed by making a cooperative financial planning a valued adding action that is aimed at achieving the business of the organization premeditated goals and intents. Conclusions Cooperate Financial planning is an unceasing practice necessary for allocation and directing financial resources to meet the business or the organizations strategic goals and set objectives. The financial planning output takes the form of budget, with the mostly used budget being the budgeted financial statement or the pro forma budget. Business operations can be affected by cooperate financial planning (Capon, Farley & Hulbert, 2009). The major effect is to ensure the business succeed in its operations and to determine new changes and directions to be taken by the business operations. Business cooperate financial plans should, therefore, be reviewed periodically depending on the nature of the business. The importance of periodic review is to compare the current position of the business and the strategic plans that are laid for the organization success (Chandra, 2010). Necessary adjustments should be made in the weak point areas where the operations are not in accordance with the objectives and plans. The changes in financial planning should be attributed to economic stability, business needs, and consumer demands. References Capon, N., Farley, J., & Hulbert, J. (2009). Corporate strategic planning. New York: Columbia University Press. Chandra, P. (2010). Fundamentals of financial management. New Delhi: Tata McGraw-Hill Education. Ehrhardt, M. C., & Brigham, E. F. (2009). Corporate finance: A focused approach. Mason, Ohio: South-Western/Cengage Learning. Greenwood, R. P. (2002). Handbook of financial planning and control. Aldershot, Hants, England [u.a.: Gower. Henderson, S. (2011). Financial planning DIY guide. Richmond, Vic: Wrightbooks. Lee, et al., (2009). Financial analysis, planning & forecasting: Theory and application. Singapore: World Scientific. Read More