Financial Planning- Steps

Financial plan refers to a statement estimating the amount of funds that is required and deciding its composition. The quantum of funds depends on the asset requirement of the business. The time when funds are required has to be properly judged so that it can be brought into the business without any delay.

Steps that has to be taken in financial planning are very clear

Establishing financial objectives
Financial objective of the business must be clearly set. Both Short term and long term needs should be kept under consideration. Main aim must be the optimum utilization of the financial resource. The concern should take advantage of the prevailing economic conditions.


Formulating Financial Policies
Financial policies deal with the procurement, administration and distribution of funds. It must take care of the present and future financial needs simultaneously. It must have clear cut plans for raising funds as well as its probable uses.

Formulating procedures
Procedures are formed to ensure consistency of actions. The procedure follow the formulation of policy. If it is a policy to raise short term funds from bank, then a procedure must be laid to approach the lenders and the person authorized to initiate such actions.


Providing for flexibility
The financial planning should ensure proper flexibility in objectives, policies and procedures to adjust according to changing economic conditions. Changing economic conditions may offer new opportunities. The concern should be capable of taking advantage of such a situation. A rigid financial plan restricts to gain such advantages.