What is the financial planning process?
The financial planning process is a means by which the enterprise or individual defines financial objectives and creates a strategy to achieve them. The financial plan not only serves as an organizational control list of actions, but can also be a document against which progress needs to be checked to see if a strategy change is required. The financial planning process may vary depending on the unique characteristics of the person or business and their goals, but there are several general steps that make up the spine of almost every plan.
The first step in the financial planning process is to determine the current financial situation. For individuals, this may simply be a review of income versus expenses for the last year and factors such as long -term debt. It may be necessary to take into account revenue, sale and expenses for business. Having a clear picture of the present allows the planner to switch to inventing strategies for the future.
From this point, some educated estimates are necessary in most cases. The planner must be re -To clean up what income or sale is likely to look for next year, due to any major changes in habits or operations. Some people use software known as trend programs that help predict the level of business sale based on current data. Individuals may have easier time to take this step if they have the expected constant and safe source of income next year. It is important to note that these forecasts are the "best estimate" in the financial planning process; Some experts recommend creating several plans that can be made if the results are extensively deviated from the expected results.
The individual in the financial planning process after the assembly of current data and exploring future performance will want to determine how much money he will have for investing or savings. For a person who wants to increase economic percentage, it is important to find areas that can be cropped or eliminated in the planned budget to release assets for investment. From now on canE of the financial planning process is introduced by the use of investment or savings strategies on the basis of research or personal preferences.
Businesses may have to go through a few more steps in the financial planning process before the introduction of the plan. Several levels of financial and managerial executives may need to be reviewed and tuned the plan before being acceptable to all involved. Factors that can influence the business plan may include rising material costs, introducing new products, revised marketing or advertising campaigns and changes in investment.
individuals and businesses can use a plan created through the financial planning process to check progress throughout the year. Plans are usually divided into monthly segments with the aim of profit or savings for each month. If the plan meets or cheers a close goal every month can be considered successful.