Financial and strategic planning are two crucial processes that an organization must include in effort to have a financially stable company that is able to strategize accordingly. Financial processes include planning that is based off research and analyzations of items such as those used in the financial statements in effort to determine the organizations true financial certainty. To plan regarding finances, you are planning to meet or exceed the business’s needs. After the financial planning is established and set, the company then is bound to begin strategically planning; setting direction and goals for the future of the business and the ways in which they can move forward. “If you want to change your strategy, you must first confirm you have the money to do so or how you will get it.” The Relationship Between Strategic & Financial Planning. (n.d.).
The process of financial planning in any business is to predict the future financials of the company. In addition to that, it must be established, after thorough research, what will be the best use of the company’s money for all the goals that the company has no matter if they are short term or long term in length. With the involvement of future planning, some uncertainty is possible, therefore it requires original ideas as well as organized processes. The main purpose of financial planning is to make successful plan that will avoid debt to the company while at the same time still reach for the company goals. A financial plan is not made on the fly but rather it is planned out by setting out the goals that need to be accomplished. Once this is done then we can know what to aim for. By analyzing the true financials of the business, which then allows us to see how much future risk we can afford to accomplish our goals now and what needs to become a long-term goal in the future. Which brings us to scheduling out every step of the short-term plan and long-term plan to make sure that all the resources are being put in the right places. Sticking to a schedule on time and budget, allows future goals to be planned for but it needs to be reviewed periodically to make sure that the company is still on point for its goal.
Relationship Between Strategic & Financial Planning
Strategic planning begins by identifying where an organization is at presently, where it wants to go, and how it plans to get there. Organizations need to identify their objectives (mission and goals) and follow up with meaningful objectives that will contribute effectively to their profitability and growth. Once a plan has been established, the organization must identify the operating expenses involved in meeting the objectives from the strategic plan and figure out a budget that will allow them to avoid any financial downfalls or the reliance on external financing. Brian Boone (2010), explains that “good financial planning helps a company maximize cash flow with pinpointed resource allocation and investment strategies” (The pros and cons of strategic and financial planning, para. 4). Strategic planning is the what and why while financial planning is the how and when. Data and financial analysis are implemented to determine trends, competition, profit margins, expenses, economic changes, and government regulations that have an impact on the organization. Money and human resources are essential factors that are considered in financial planning to reach the goals outlined in the strategic plan. Strategic planning allows those in the organization to be aware of what the present and future expectations are. Financial planning helps to identify the financial needs that will be required to meet those expectations (the cash on hand and how much will be needed later). This plan will provide a structured outline on how to maintain financial stability and monitor what is coming in or going out of the business. “Both types of planning involve defining objectives, gathering and analyzing data, implementing the plan, and monitoring the results” (Wanda Thibodeaux, 2017).
After all, any impact or threat to the company such as economic changes, trends, profits, competition, technology, or any other stakeholder related influence for that matter, may affect the financial stability of the company also creating a change in strategic planning. “Ideally, strategic and financial planning always are intertwined in a business, working together in a cyclic way.” The Relationship Between Strategic & Financial Planning. (n.d.). Both financial and strategic planning have steps that are used to come up with a conclusion for the desired result. For instance, in financial planning one is to gather information, analyze, document, and monitor the results or changes in the company. In strategic planning, one is to gather financial results as well as any relating changes or documentation and strategize, for optimum use. Whether it be short term goals or long, planning methods are to be utilized in the decision-making process.
Boone, B. (2010). What’s the difference between strategic and financial planning? Retrieved from https://money.howstuffworks.com/personal-finance/financial-planning/strategic-and-financial-planning.htm
Thibodeaux, W. (2017). The relationship between strategic & financial planning. Retried from http://smallbusiness.chron.com/relationship-between-strategic-financial-planning-21063.html
About Business Financial Planning. (n.d.). Retrieved November 17, 2017, from http://smallbusiness.chron.com/business-financial-planning-2675.html
What Is Successful Financial Planning? (n.d.). Retrieved November 17, 2017, from http://smallbusiness.chron.com/successful-financial-planning-21696.html
The Relationship Between Strategic & Financial Planning. (n.d.). Retrieved November 19,2017, from http://smallbusiness.chron.com/relationship-between-strategic-financial-planning-21063.html
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HCS385 Week 4 Team Assignment Financial Planning.docx