Keys To Carry Out Financial Planning

Focusing on financial planning can often be difficult due to the multiple tasks that a company must face in order to align its strategies and focus on the objectives of its business. That’s why we present here some tips to make your financial planning easier.

Table of Contents

What are the keys to financial planning?

Business review: financial planning represents the synergy between figures and strategy, this is where it is necessary to review the figures of the current year and establish if these have been aligned with the strategies proposed by the business. By reviewing that, it is possible to identify the internal and external variables that impacted positively or negatively by the results. Here it is vital to involve all the members of the company since this process must be participatory so that it has the expected results.

Redirecting the strategy: with the information obtained through the business review, the next step in our financial planning is to redirect the strategy through the perspectives of the future of our businesses. What comes to the sector? What are the risks for next year? What changes in tax, legal, customs and/or similar legislation can impact my business?

Construction of the figures: well, this is the most important and most complex part of the process, since with all the information collected, we will now return to the numbers proposed, and this is achieved by defining the structure of the financial information as a statement of results. It is highly recommended to always have in the projection the variables that will impact the items, examples of them are: inflation, economic projections made by banks, the rise in prices in the sectors and in general all the internal and external variables that had been identified. All this information will make the projection as biased as possible, which is why it is vital to identify all the variables very well.

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Projection of scenarios: all financial planning and in general any planning in life, must be based on scenarios that for the particular exercise will be defined in three:

Moderate: this scenario shows our financial planning with the most concrete data and that we have defined through the previous points.
Optimist: as insisted in this article, since financial planning is the synergy between figures and strategy, the contributions that can be made given the knowledge of the business can foresee that some of the situations raised in the moderate scenario may impact in a very positive way within our business.
Pessimistic: in line with the previous point, the pessimist shows the figures with negative and even dramatic impacts.

This projection of scenarios allows us to act proactively in the face of situations that may arise during the year subject to projection.

Review and approval: after the scenarios have been proposed, where the moderate scenario is always chosen, a final review will be carried out, where it is checked whether everything stated in the strategy is reflected there, things to take into account, for example, are: number of employees to be hired, investment in fixed assets, production projections, etc.

How do I monitor my financial planning?

Already when the year in which financial planning has begun, it is important to see how the strategy designed by the company will be monitored to achieve the objectives. Here are some tips that will be useful to carry out this process:

Establish standard reporting and analysis times, which is achieved by having an accounting system that allows us to generate information in real time and added to it, generate graphics to understand more easily the behavior during the period under analysis. One suggestion is to do a quarterly review.
To this review add contributions such as the application of new laws not contemplated in financial planning, changes in the economic environment where the business operates, the application or otherwise of laws contemplated in planning, etc.
The product of the previous points should take corrective actions to comply with the strategy. As scenarios had been designed, they could have taken preventive actions for certain situations that the business cannot control and which must coexist with them. The cost of preventing is less than correcting, always keep that in mind.

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