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Objectives of Financial Planning: Failproof Tips for Better Business Financial Planning

objectives of financial

A financial plan can be the most challenging aspect of developing a company plan. Businesses with a comprehensive financial plan are better prepared to pitch to investors, secure funding, and achieve long-term success.
Fortunately, you don’t need an accounting degree to put one together. All you need to know are the key objectives of financial planning and some fail proof tips to get you started.

What is a Financial Plan?

Financial planning is the process of forecasting future financial results and determining how to best use a company’s financial resources to achieve its short- and long-term goals.
Financial planning involves both creative and analytical thinking since it involves looking far into the future.

What are the objectives of Financial Planning?

The objectives of financial planning must include:

1. Evaluation of company objectives:

Before implementing business procedures, methods, techniques, and strategies, financial planning’s goal includes evaluating them.

2. Verification of vision and goals

A business’s vision and plans must be confirmed before developing a financial strategy. Especially in a volatile business environment, this is an important part of the objectives of financial planning.

3. Identification of finances available to meet objectives

The primary area in which financial planning is proficient is generating money and making it available whenever needed. It also offers an estimate of the finances required.

4. Estimation of time and source of funds

The availability of funds at the correct time and location is as crucial as their generation. The source of funding is also a key aspect in achieving corporate objectives.

5. Estimation of costs involved in financial plan creation and execution

The price of the plan may fluctuate over time. Formulating and implementing a successful financial plan requires determining a realistic cost.

6. Identification of hazards connected with financial plans

One of the most important goals of financial planning is to identify the risks and issues associated with such financial plans, which saves a lot of time and money at an early stage and allows for the development of counter-strategies.

7. Capital structure generation

The capital structure describes the kind and proposition of capital necessary in the firm. It also covers the planning of money needed for both short-term and long-term purposes and the debt-equity ratio.

8. Avoid raising superfluous funds

Raising more dollars than necessary is just as harmful as raising insufficient or insufficient finances. Excess funds do not increase profits; they increase the company’s costs. One of the most fundamental goals of financial planning is to ensure that the organisation does not raise extra resources.

objectives of financial planning

Components of a successful Financial Plan

Now that we have covered the objectives of financial planning. Lets talk about the key components involved in a successful financial plan. All business plans, whether you’re beginning a new venture or expanding an existing one, should include the following:

1. Sales projections

Every month, quarter, and year, you should have an estimate of your sales revenue. Identifying trends in your sales cycles helps you better understand your organisation and is also useful when planning marketing activities and growth strategies. A seasonal business may attempt to increase sales during the previous off-season to become a year-round endeavour, while another company may become better prepared by studying the correlation between upticks and downticks in revenue owing to factors such as the weather or the economy.

Sales forecasting is also the foundation for establishing firm growth objectives. For example, increase your sales by 10% over the preceding period.

2. Expenditure

Regular spending, predicted future expenses, and related expenses are part of a comprehensive expense plan.

Regular expenses are the present continuous costs of your firm, such as rent, utilities, and wages. Recurring expenses are associated with annual company activities such as conference attendance, advertising and marketing spending, or the office parties. A detailed list of regular expenses will help you distinguish between necessary and those that can be lowered or eliminated if necessary.

Tax rate rises, increased minimum wage, or maintenance requirements are examples of expected future expenses. Prepare for unforeseen expenses, such as damage caused by fire, flood, or other unforeseeable events. Planning for future expenses ensures that your company is financially prepared, whether through budget cuts, increased sales, or financial aid.

Associated expenses are the expected costs of various activities, such as hiring and training additional employees, opening a new store, or expanding deliveries to a new territory. An accurate assessment of related expenses assists you in appropriately managing growth and keeps your company from surpassing its cost capabilities.

Understanding how much cash is required to achieve specific growth goals, like estimated future expenses, help you make the appropriate selection regarding financing solutions.

3. Financial position statement (assets and liabilities)

Your company’s assets and liabilities are the foundation of its balance sheet and the significant determinants of its net worth. Tracking both guarantees that you are maximising the potential value of your firm. Businesses commonly undervalue their assets, such as machinery, real estate, or inventory, and must account for unpaid obligations.
A balance sheet, also known as a financial position statement, provides a more comprehensive picture of your company’s health than a profit and loss statement or a cash flow report. A profit and loss statement reveals how the company performed during a specified period, whereas a balance sheet shows the company’s financial condition on any given day.

4. Cash flow forecasting

A knowledgeable business owner should be able to estimate their cash flow on a monthly, quarterly, and annual basis, similar to how they project their expenses. Planning your cash flow for the entire year assists you in staying ahead of any financial difficulties or obstacles. It can also help you identify a cash flow problem before it negatively impacts your organisation. You can choose the best payment terms for your business, such as how much you charge upfront or how many days after invoicing you expect payment.

A cash flow prediction shows you exactly how much money will be left over at the end of each month, allowing you to prepare for future expansion or other investments. It also assists you in budgeting more wisely, such as spending less than one month to cover the projected cash needs of another month.

5. Cost-benefit analysis

This section compares fixed costs to the profit on each extra unit produced and sold. You must consider revenue and expenses to evaluate the benefits of growing or expanding your business. Having your costs wholly fleshed out, as detailed above, improves the accuracy and use of your break-even analysis.

A break-even analysis is also the most effective approach to establishing pricing. A break-even analysis will tell you how many units you need to sell at different pricing points to cover your costs. It would help if you set pricing that allows you to protect your expenses while keeping your business competitive.

6. Business plan

Create a clear overview of your operational demands to run your firm as efficiently as possible. Understanding what roles are required to operate your business at various output volumes, how much output or work each employee can manage, and the costs of each stage of your supply chain will help you make informed decisions for the growth and efficiency of your firm.

Keeping expenses, such as payroll and supply chain, under strict control concerning growth, is critical. An operations plan can also help you decide whether there is room to improve your operations or supply chain through automation, new technology, or superior supply chain providers.

As a result, the business owner must undertake due diligence before opening an account and becoming aware of merchant services. Once the owner signs a contract, it cannot be modified unless the owner breaches it and opens a new merchant account.
Finally, to maximise earnings from accepting credit cards for items and services, the business owner should take steps to plan cash flow creation.

What should be included in Financial Planning?

By assessing a business idea’s viability in this way, it can be determined if it is viable. What are your projections for revenue? Will your company be lucrative or not? It also makes you think about your cash flow and if you’ll have enough money each month. The secret to your success is to answer all of these questions in your company strategy.

1. Budget for investment

Your investment budget should include a list of investments required to launch your firm and those that may be postponed. To get started, you’ll need a minimum amount of money.

2. Budget for finances

Your financial budget should include information on how you intend to fund your investment budget. Personal capital (equity capital) or loans (borrowed money), such as from a bank, are options, as is a mix of the two.

3. Budget for operations

Your operating budget should demonstrate that your company is profitable. Forecasting your revenue will be easier if you do this. You may then calculate the costs of running your firm. By combining these factors, you can determine whether you will make a profit or a loss.

4. Budget for cash flow

Over a year, income and expenditure might shift dramatically. Your cash flow forecast should contain all income and expenses for a specific period, such as a month or quarter. As a result, you will know when you will have excess cash and when you will need additional funding.

5. Personal spending plan

One alternative is to determine how much personal money you have and then base your financial plan on that. Calculate how much money you will need for yourself and your family, how much tax you will have to pay, and how much you will spend on operational expenses. This way, you can calculate the minimum turnover you need to meet your financial obligations.

objectives of financial planning

Tips for better business Financial Planning

While many areas of business financial planning are comparable to personal finance (for example, budgeting, risk management, tax and investment strategies, and retirement and estate planning), there are some significant variations.

1. Distinguish between business and personal objectives of financial planning

Blurring the lines between personal and commercial ambitions may require you to sacrifice one area of your money for another. You may want to add a new product to your inventory while contributing to your child’s 529 plan. Which comes first?

Of course, you’re starting the company to make money and further your financial ambitions. However, distinguish between personal and corporate goals to avoid harming both.

We’re not only talking about segregating your finances, such as having different checking accounts – though it is essential. We’re discussing visioning and goal setting. Consider the following:

Personal: What are my top priorities right now? Get more exercise, or learn a new skill. What are my five- and ten-year goals? What is the importance of my family?

Business: What are my top priorities right now? Examples include hiring a new employee and developing a marketing strategy to acquire additional clients. Where do I see my company in five years? What are our top priorities for product or service development?

2. Investigate your financial alternatives

Business founders typically self-fund, or bootstrap, which means that personal finances are the only or primary source of financing for the owner. Investing in the business makes sense: Bootstrapping allows you to expand your firm slowly and organically while ensuring that the model is financially sustainable.
On the negative side, you need to be well-diversified. Depending on how capital-intensive your business is, using savings or credit cards for beginning funding can expose you to severe financial risk.
It’s a good idea to mitigate some of that risk by looking into one or more alternative sources of finance.
Fortunately, there are plenty more places to obtain funds. Bringing in outside sources of finance, such as giving shares in exchange for a good or service, company loans, client presales, or recurrent sales, helps assure consistent capital input.

3. Concentrate on liquidity

Your balance sheet may show that your company is financially solid, but it does not imply that your assets are liquid. The goal should be to have more assets than liabilities to satisfy your short-term financial responsibilities.

And the specialists in charge of external funding sources, such as business lines of credit or inventory/receivables factoring, will expect you to be aware of your liquidity situation. All businesses should track the number of additional KPIs, including cash conversion cycle, days sales outstanding, days payable due, and days inventory outstanding.
Some organisations might even form a “cash committee” to constantly monitor daily data and report on liquidity status.

4. Cash flow

A solid cash flow allows you to meet present responsibilities, such as paying staff and purchasing raw materials, while saving for investments and emergencies. Accumulating assets, such as real estate or inventory, is excellent, but your firm will suffer if cash flow is a problem.

A formal cash flow analysis will show you how much money is coming in and out of your company. This information enables you to plan accordingly. When you conduct these studies regularly, you will get a historical perspective. You can estimate how much money you should set aside as reserves to weather the lean months or an unanticipated cash flow shortage.

5. Tax administration

Going the do-it-yourself method may work for your personal finances, but tax preparation can be significantly more complicated as a business owner. Outsourcing tax planning and preparation to a trained, certified public accountant (CPA) or another financial professional assisting you with your business will not only save you time but may also minimise your tax bill.

A CPA is well-versed in local tax regulations and may advise you on various techniques, such as optimising acceptable company costs and the amount to pay in estimated taxes to avoid a large bill — or handing Uncle Sam an interest-free loan.

One final point: According to one business valuation expert, founders often make the error of structuring their businesses to avoid paying taxes. Their net income may be zero or even harmful if they are successful. However, this poses significant issues when seeking funds or investments.

6. Risk management

Identifying and managing risk is something that every business must do. Still, it often falls to the bottom of the priority list because developing a plan that tackles all potential hazards appears to be a monumental undertaking. And, sure, it is nearly hard to handle every risk that may damage your organisation. However, you can restrict the list and implement measures such as cybersecurity insurance and a disaster communications plan.

Here are some topics to think about while developing a risk management strategy:

  • Provide adequate coverage for yourself and your staff while avoiding overpaying for healthcare and worker’s compensation.
  • Include cash flow contingencies in the event of a business interruption caused by a calamity or the death of a key employee.
  • How will you handle the loss or theft of business property and fraud committed by an employee, supplier, partner, or other third parties?
  • Consult with legal counsel about how to defend your company from lawsuits.


Your financial strategy may appear daunting when you first begin, but this portion of your business plan is vitally crucial to comprehend.
Even if you outsource your bookkeeping and regular financial analysis to an accounting firm, you, as the business owner, should be able to read and interpret these papers and make decisions based on what you learn. A business dashboard application helps simplify this process, so you don’t have to wade through spreadsheets to enter and modify every item.
If you generate and present financial statements that operate cohesively to tell your firm’s story, and if you can answer inquiries about the source of your figures, your prospects of receiving money from investors or lenders will be significantly increased.


1. What kind of data do most financial planning start with?

Ans: Financial plans are created by entering prior financial statements into a corporation. Analysts typically look at historical data from the past three to five years.

2. How much time does it take to create a financial plan?

Ans: A financial plan may take more than three weeks to construct. As a result, precision and double-checking are required.

3. Which are the most widely used financial planning tools?

Ans: Financial tools are abilities, components, and information that aid analysts in developing economic models. Analysts must create these tools using their understanding of Microsoft Excel, decision-making abilities, and colour formatting knowledge.

4. What is the difference between financial forecasting and financial planning?

Ans: Though financial forecasting and financial planning share certain commonalities, they also have significant distinctions. For example, financial modelling estimates revenue and develops projections, whereas financial forecasting depicts a company’s cash flow over a specific period.

5. What are the objectives of financial planning?

Ans: The objectives of financial planning must include:
a. Evaluation of company objectives
b. Verification of vision and goals
c. Identification of finances available to meet objectives
d. Estimation of time and source of funds
e. Estimation of costs involved in financial plan creation and execution
f. Identification of hazards connected with financial plansCapital structure generation
g. Avoid raising superfluous funds

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