Financial satisfaction is the result of an organized process, the process is called financial planning. In order to achieve goals within the company, managers need to determine and set priorities.
Financial planning is the process of managing your funds for financial satisfaction. Through this planning process, you can control your financial situation. A comprehensive financial plan can reduce uncertainty about future needs and resources, thereby improving your business management. Specific advantages of financial planning include:
- Better protect future financial resources;
- Strengthen control to avoid excessive debt, bankruptcy and dependence on third parties for economic security;
- Well-planned and effectively communicated financial decisions can improve relationships;
- Look to the future, forecast expenditures and achieve their economic goals, and get rid of financial worries.
We make hundreds of business decisions every day, some of which are simple and routine, while others are more complex and may have a certain impact. The financial planning process is a logical process that can be divided into six steps:
(1) Identify your current financial situation
(2) Develop financial goals
(3) Determine the course of action
(4) Evaluate alternatives
(5) Develop and implement a financial action plan
(6) Reassess and revise the plan.
Step 1: Determine your current financial situation
In the first step in the financial planning process, you will determine the current financial situation of the balance sheet of the company. Compile a list of current assets and debt balances and the amount spent on various projects, laying the foundation for financial planning activities.
Step 2: Set financial goals
You should check your financial goals regularly. The purpose of this analysis is to distinguish your needs from your wishes.
Specific financial goals are critical to financial planning. Your financial goals may vary based on your current business conditions. Maybe it’s time to make new investments, cooperate with startups, launch new services or products, or maybe it’s time to get a financial insurance company.
Step 3: Determine the course of action
Developing alternatives is essential to making the right decision. Although many factors influence the alternatives available, the possible course of action usually falls into the following categories:
- Continue the same process.
- Extend and improve the current curriculum.
- Change the status quo.
- Take a new course of action.
Not all of these categories are applicable to all decision-making situations; however, they represent possible courses of action. Creativity in decision-making is essential for effective choices. Considering all possible alternatives will help you make a more confident decision.
Step 4: Evaluate alternatives
You need to consider the current economic situation of your company and evaluate alternatives. Note that your goal will not trigger tax risks that could harm the financial health of your business.
Of course, you must prioritize one financial strategy at a time, and often have to postpone certain projects. This choice is called trade-off because it is related to decision conflicts. It is characterized by taking an economic activity, focusing on one activity and abandoning another activity.
Step 5: Create and implement a financial action plan
At this stage of the financial planning process, you need to develop a plan of action. This requires choosing a method to achieve the goal. When you achieve near-term or short-term goals, the next priority will become the focus. To implement your financial plan of action, you will need business advice.
Step 6: Review and revise your plan
Financial planning is a dynamic process, and the process does not end when you perform certain actions. You need to evaluate your financial decisions regularly.
When company events affect your financial needs, this financial planning process will provide a way to adapt to these changes. Regularly reviewing this decision-making process will help you make prioritization adjustments to align your goals and financial activities with current business conditions.