Financial Planning

Written by Patricia Tunstall
Bookmark and Share

Any well-run business produces financial statements based on past performance. Income statements, cash flow statements, balance sheets--these are issued annually, with modified, shorter versions provided to management more frequently. These modified statements record the details of the past period, one purpose being to enable comparison with the same period earlier or later.

This progress report is for internal viewing only. Confidential details about strategy and operations are meant only for management. Once the business manager becomes familiar with the financial analysis of the past, financial planning for the future can begin.

Financial Planning: the Future

A simpler word for financial planning is budgeting. Most private citizens budget in order to have enough money to pay bills and buy food. Financial planning for corporations and businesses is on a grander, more complex scale, but the purpose is similar. Today, budgets for businesses are entered in computer spreadsheets.

Cash flow statements analyze the past. Budgeted cash flow projects into the future. This budgeting enables the business manager to create an overall financial strategy, and to produce a plan that provides objectives, and the means to achieve them. Without financial reporting about past performance, management would be unable to project reasonable goals for the future in the form of a budget.

Bookmark and Share