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  • Category: Finance and Investments

    Why is financial planning important in business?

    Wondering about the importance of financial planning? Looking out for knowing its significance in business? Check out this page for response to your queries.

    In business world it is very much important for proper financial planning. Accordingly they have appointed various experts and spent huge amount for this purpose. But we know that every consumer is very much aware about the money matters and before spending they might be thinking about it's implications.
    Can you provide any additional suggestions for why financial planning is important in business?
  • Answers

    11 Answers found.
  • Planning is one of the five functions of management. Here planning is to= make plans about organization. Planning objectives that are flexible and yet executable. Without a proper plan a business would crumble before i begins.
    Customer satisfaction is the utmost priority of any organization. So the things you have to plan about are:
    1. what you have to do?
    2. When to do?
    3. How to do?
    4. Where to do?
    If you get the correct answers for all the above questions, customer satisfaction is the only thing you need to worry about. Feedback and support methods will tell you about customer satisfaction.
    Steps to plan:
    1. Set an objective.
    2. Always have a plan B.
    3. Secure co-operation.
    4. Follow up/ appraisal of plans.

    Hope that answers your question.

    The stronger a light shines the darker are the shadows around it.

  • Financial planning is important in almost everything not just business. In case of business the context of the business limits you from spending or doing things which are not profitable.

    1. Business needs to avoid the unnecessary expenses if they want to grow.
    2. Business should not hire people who are not doing any work to increase profit for the company.
    3. Business should save money on things which they can do without.
    4. Business should save money on almost every hierarchy in the company structure.

    These are the basic principles when it comes to money management with business. Failing in those basic ones it's harder to pivot and scale the business in future.

    Many business start with the bootstrap budget. And they need to be grown only by being proactive. You may find that financial planning requires a lot of patience and handling of cashflow.

    Apart from cashflow and customer generation, if these two things are not properly managed they lead to financial collapse. Most of the business fail due to the fact that they run out of the cash. You may also find that lack of cash, lack of funding and lack of people management skill are the reason business fail. And for this reason financial management is very much important.

  • Financial planning is an invetible exercise to make the Business success and it should aim for zero wasteful expenditure to make the organisation profitable. Hence there are inclusion of panel of financial experts to attain the goal.
    1)The financial experts analyses the loop - hole in production procedure and their aim is to curb the unnecessary expenditure. They would ensure that the basic inputs are available in the vicinity of the production so as to arrest the unwanted expense.
    2) Inventory - control is a must so that there is no unnecessary financial holdings thereby causing a check of the financial flow.
    3) They would acess the strength of the existing man - power and their work must be directed towards the maximisation of the revenue of the organisation.
    4) Instead of purchasing a new machinery, they should look at the ways how the production level can be achieved with the proper maintenance of the existing units.
    5) The organisation must have sufficient cash - flow say around 30 percent of profit to take care of unforeseen circumstances in order to lead in the business.

  • Financial planning is more important not only for business but in any field. There is an important element that needs concern while one is planning for business - 'the value for money'. One has to think of the cost overheads, manpower/human resources and a proper management is required such that there won't be any delay in mobilizing these resources which in turn would have a financial bearing. Here comes the time management apart from financial planning. there should be proper cash reserve to meet the challenges of unforeseen happenings. The financial management should see that the expenditure should be at the marginal level for advertisement and marketing but their goal should reach to all. The essential commodities required for business should be worked out properly and the stake holders should see that no infructuous expenditure is incurred and any liability should be taken care properly. It generates our credibility among customers,


  • Hi,
    As per your question I am trying to answer it. If you are running a business it is so important for you to have financial planning. And very specifically you will need financial planning in every aspect of your life.
    When you are in a business you must learn how to use your manpower and cash reserve to get the desired success. When you do such a planing for your business you must have a plan B, as it will help you when the plan A fails.
    The the most important portion of a financial planning is to keep a reserve on the profit that you gain, as you must save some portion of your profit for future development and unforeseen circumstances.

  • Finance is a very vital input for any business. Finance is needed to start a business and run a business . As capital has its own expenditure and business expects a reasonable return on the invested capital, the entrepreneur should be able to know how to use the finance prudently and in optimum , and on time needed. He should know what will the profit on an investment of a certain sum o money and in how much time period the amount will come back. Above all, there should be prudent provision for possible delays , happenings beyond our control etc.

    Proper financial enables the business promoter or investor to know how much is needed at what priority. How the source has to be tapped, how much return can be expected and promised etc. Then planning helps to assess how the money is turned over so that it can be reused in the cycle and the business becomes self sufficient.
    Financial planning also gives awareness about how and what to be deployed for the other inputs and the normal possible escalations there of.
    Planning also helps to plan and predict the future use of profit by ploughing back into the business and any future expansions.

    There is a saying in Malayalam(and possible similar sayings will be in other languages also) that even if you throw something into a river, you should measure and know how much you throw. That underlines the essentiality of financial planning.

  • Every business has profit motive.

    Every business starts from the identification of financial planning. Withot proper and systematic maintenance or financial plans, it will affect the finances of the business. Thus, one can locate the errors and rectified because every busness has profit motive and it has transaction of financial nature, such as, purchasing goods, selling goods, incurring expenses and etc... So these transaction are financial in nature and affect the profit of the business.

    Hence, the financial planning is important for any business.

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  • In any business financial planning is very important. Actually before starting the business, how much capital amount is required, what are the resources available and how to bridge the gap. Where to get financial support and at what cost are to be studied is an important part of financial planning. Once the business is started,how much money is required for day to day operations is also a part of financial planning. Are we going to allow any credit for any sales, how much is the lead time and how much funds are required for filling the gaps. Similar analysis for inputs for business is also a part of financial planning. Realisation of sales and payment to debtors is to be carefully analysed and planned. This is also a part of financial planning. Funds availability for day to day requirement is again an important part of financial planning.

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  • The sustainability of any business is depend on the financial planning. It is the back bone of all establishments whether small or big. Based on the financial analyses only we can predict the business is profitable or not. Any financing agency will finance the business based on the detailed project report of the business. Starting a business without financial planning is like firing in the air with closed eyes. Many business collapse in the middle due to improper financial planning . The very important aspect of financial planning is Estimation of break even point and debit credit coverage ratio.

  • Finance is the life blood of any business, hence proper financial planning is essential for the success of every business unit.

    1. If you have a proper plan, then the money you have can be utilized more effectively. You know where to spend and how to spend and also you foresee your future monetary requirements and will limit your current spending to meet the future needs. In short, it gives a better financial understanding.

    2. Financial planning gives you an idea of how to procure funds in case of emergencies or when the fund you have is limited. The plan will certainly consider the options available and the most cheapest and feasible option when it comes to arranging funds. You get an idea of how much extra fund needs to be arranged and through which source.

    3. Another important advantage is that it helps you to wisely invest your funds. Be it fixed assets, inventory or current assets, everything requires money. A proper planning will help one to understand where to spend and how to maximize production or profit by spending in a particular manner.

    4. Cash flow is a must in a business; if the flow gets stopped, it will affect the entire function of the business. Financial planning helps to stabilize or manage the cash flow by regulating the business unit's spending pattern.

    5. Tax planning is another area which Indian business has to face. It is also included under financial planning.

    Not only in business, but in your day to day life also financial planning is important. It helps one to have a check on their expenditure and helps in limiting it.

    "Do not give up, things might not favour you always"

  • This is not subject & concept of budget & Finance. This is an essence of planning & Budgeting of finance in an organization with help of an example.
    Financial Planning & Budgeting helps to monitor the expenses & resources of a business based on monitory values.
    If we are not planning a proper finance requirement, We may go to bankrupt.
    We are planning a budget for Office Maintenance. Last year we spent Rs.10000/- for Office maintenance. Based on our current cost of living & index, we are planning a budgeted amount for office maintenance. Accordingly we are allocation finance i.e. we are making a finance plan for such expense.
    At the year end, we are doing a variance analysis for budget & Actual spent amount.
    Variance will show how we spent actual comparing to our previous year and how our financial plan exceeded. We can do an inquiry to concern department to check whether any misuse of finance allocated for the department is happened.

    Based on the financial tools, Budgetary control, Trend analysis, comparison statement for previous year & current year and budget vs actual, Ratio analysis & Formula of financial management, we can track the financial worthiness of the transactions.
    Additionally the inefficiency of the department personnel to spend an excess amount for an expense can be tracked and controlled.
    Directly we can not question a person based on a simple physical monitoring.
    This financial plan can track back the transactions & inquire the reason for excess spending and control them.

    Financial, spending inefficiency & misuse of office cash & Steeling of property can be tracked by doing an analysis with Financial plan.

    If a spending on use of vehicle consumes more cost & reduces the profit, we can do a financial plan on this and control the expense.

    Simple logic each drop of water forms a big lake over a period. If you don't plan for water management, we can not see any lake, pool, etc like a water sources for future.
    Same logic for business regarding the Finance.

    Thanks and Regards,

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