Financial Planning

Financial planning is a critical element that often is not given sufficient importance although it is the second cause, if not the first, of the death of companies.

It fits into the strategic planning of the company and has as its primary objective the analysis and solution of cash flows in the medium and long term, ie between 1 and 3 years, without going into precise periods below (such as monthly, weekly or newspapers) that are more appropriately collected within the Treasury plans .

In times of growth, we have to take into account both the financial needs for investments in assets and the current, which is the money we have to have in circulation to run the business. In these periods, the requirements for working capital increase and are essential since the rise in purchases has to be pre-financed; stocks; productions and subcontractors of the sales increases that will be charged in the future.

In times of market contraction or crisis, we must be clear about the impact on the treasury. The reduction in business volume implies lower sales and revenues and often lengthening the payment terms of our customers, which means a lower availability of money to finance a business that also requests longer financing terms.

Financial planning focuses on large patrimonial masses that must maintain their consistency over time:

Financing needs.  What assets should be bought or disposed of? That circulating will be needed.

Sources of financing.  Those generated by the results of the business itself; the variation of the circulating one; the dividend policy; the level of short-term debt (systems and short loans);long-term debt (long-term loans); capital increases; participative investments and, even, operations of off-balance calls such as Sale & Leaseback and others.

Proper financial planning in times of growth ensures that large-scale financing needs are met or if funding availability is limited to be able to set the growth rate at sustainable values. In times of decline, it allows us to know, in advance, the financing needs, adjust the company’s financing structure and carry out better negotiations with banks since immediate needs do not pressure them.

Tips for good financial planning

With personal financial planning, you can analyze the current economic situation, establish your objectives to achieve and formulate the plans that allow you to make these objectives. Through financial planning, you will meet better management of your finances, and an improvement in your economic situation.