Financial planning in a business is becoming more prominent because every player is facing cut-throat competition in the operating business environment. It is logical, therefore, that every business enterprise should judiciously plan its finance and utilize it optimally.
Financial planning simply refers to those activities in a business organization that will determine its optimum requirement for liquid funds. By extension, it refers to how and in what mix the funds should be raised and utilized so as to be able to achieve its strategic goals and objectives.
Financial planning is so important in a business enterprise because funds obtained for business operations always come at a cost and the availability of money is limited. As such the need for financial planning in a business cannot be over-emphasized. The cliché, "waste not, want not" should be held sacred in any business if that organization hope to achieve maximum use of her available funds and maximize profits.
However, for financial planning to have meaning the business owners and managers must be credible. Credibility is paramount because the more credible an organization becomes, the easier it is for it to raise finance to execute business expansion projects, working capital management and so on.
In league with financial institutions and suppliers, a business firm can achieve optimal financial planning by taking advantage of some available financial packages like:
– Sale and Lease Back
– Use of Foreign Guarantee
– Opening Letters of Credit
– Documentary Bill
– Bills of Collection
– Deferred Payment
– Commercial Paper
– Domiciliary Account Opening
– Trade Credit
In conclusion, applying a mix of these financial packages and turning it over several times will reduce the cost of capital / fund substantially. As it is, a financial plan can be seen as a budget or plan of spending and saving income.
This will go a long way to help the business to achieve optimal financial planning.