Financial Planning

Financial Planning Process – Step by Step Guide

Financial planning is the planning of all income and areas of spending money to ensure the development of the organization. The main goals of this process are to establish a correspondence between the availability of financial resources of the organization and the need for them, the choice of effective sources for the formation of financial resources and profitable options for their use.

What is the financial planning process?

In the process of financial planning, an optimal proportion is established between financial and material resources. Financial planning in organizations is interconnected with the planning of economic activities and is based on the indicators of the production plan (production volume, sales, production cost estimates, capital investment plan, etc.). In the process of drawing up the draft financial plan, a critical approach to the indicators of the production plan is carried out, on-farm reserves that are not accounted for in them are identified and used and ways of more efficient use of the production capacity of the enterprise, more rational use of material resources, improving the quality of products, expanding the range, etc.

At the same time, financial planning is designed to determine the optimal proportions in the field of financial relations, that is, to ensure a rational ratio between the volume, the rate of growth of production and the financial resources of the enterprise, between the budgetary, own and credit resources directed to the expansion of production.

Development of a financial plan is a sequence of a number of interrelated procedures that characterize a single financial planning process. The need to divide the process of developing a plan into separate stages is due to the fact that this allows you to identify the state of individual stages and formulate proposals for improving the financial planning process as a whole.

What are the steps involved in the financial planning process?

Analysis of the financial situation

The first step in the financial planning process  is analysis of the financial situation. Based on the accounting statements for previous years, an analysis is carried out in various directions. So, can be analyzed:

  • structure and dynamics of financial results;
  • structure and dynamics of assets and liabilities;
  • efficiency of financial and investment activities.

This stage is necessary in order to identify the existing problems.

Financial strategy

Next step is, development of the financial strategy of the enterprise. Based on the results of the previous stage, strategic financial goals are set.

Financial strategy is a set of goals and objectives within the financial sphere of the enterprise. Should include goals in the following areas:

  • formation of financial resources;
  • use of financial resources;
  • financial security;
  • quality of financial work.

The result of this stage should be a program of strategic financial development and forecasts in the context of the main financial reporting forms.

Financial policy

The third step, financial policy development. Based on the adopted financial strategy, tactical decisions are made in the main areas of financial work, i.e. e. tax, depreciation, investment, price, customs, emission, dividend policies.

Current financial plans

Fourth step, development of current financial plans. Based on the adopted indicators of the financial strategy, the adopted financial policy and planning documents for the main areas of the enterprise, the development of current financial plans for the year is carried out. The main goal of the stage is to determine the general feasibility of economic and financial decisions in the planning period.

Operational financial plans

The fifth step, development of operational financial plans, i.e. That is, the specification of annual indicators into quarterly, monthly, ten-day and daily.


The last step in the financial planning process – monitoring the execution of financial plans, which is also considered a stage in the financial planning process, although the receipt of the planned value of indicators, in fact, ended at the previous stage. However, in order to make the financial plan effective, this process must be supplemented with mechanisms for the implementation of financial plans, one of the elements of which is control. The main content of control is a comparison of planned and actual values ​​for planned objects.

For the effective organization of financial planning at the enterprise, all the necessary conditions must be created. So, a special service or unit should be created, the necessary information system should be organized, including planned, forecast, accounting and analytical data.

Understanding a Certified Financial Planner (CFP)

CFPs help people manage their finances. This can include various needs such as investment planning, retirement planning, insurance, education, and so on. The most important aspect of CFPs is being the fiduciary of your assets, which means they will make decisions based on your interests.

To become a Certified Financial Planner , you must complete a bachelor’s degree, complete an approved CFP course, pass a certification exam, and have three years of financial planning experience.

Leave a Comment