How to grow professionally using financial planning at home and at work? Check it out!
Find out what is financial planning, what is its importance and what is the right type to make your life and your business prosper!
We all have dreams and goals like buying a home of our own, taking a trip, or having a car, right? But to make these dreams come true, it is essential to make good financial planning!
We are always putting off our dreams, and when we realize it, the time has passed. But changing our attitude and becoming someone else depends only on ourselves. A tool that can help you achieve your goals is Financial Planning.
It is one of the pillars for those who wish to take control of their financial life. Stay with us and learn how to make a financial plan through the following topics:
- What is financial planning?
- The importance of financial planning
- Business financial planning
- What to do for your personal financial planning?
- What not to do in financial management?
- Become a leader!
Let 's go!
What is financial planning?
Financial planning is to deal with your finances in an organized and responsible way, anticipating obstacles and making it possible for you to be safe in the face of a crisis and to go through it without suffering further damage.
It is used to protect the company's income and expenses from its personal or family finances to indicate the current economic situation.
By doing so, it is possible to clearly visualize how much you intend to earn, spend, invest, and profit, thus being able to plan the best way to use your resources.
In addition, it is through financial planning that you project where you want to go by defining financial goals and objectives.
Financial planning principles
Financial planning has some principles, that is, some reasons for its existence. Are they:
- Administrative involvement: when you make a matrix budget you not only define the goals of the accounts (water, electricity, rent) but you also define which areas are responsible within each of the accounts. Each area needs to be aware of its share of the budget for this to work. The budget will likely not be met if those involved are not actively participating.
- Organizational adaptation: most companies, especially small ones, do not work with a budget and financial planning. When it is implemented, if there is no good communication, there is a high chance that people will create a barrier, and then the budget will not happen. The company needs to be ready to adapt to this new reality.
- Accounting by area of responsibility: each area has a quota that it can use within the accounts. For example, the commercial director can use a certain amount of energy within the electricity bill, while the operational director has another quota.
- Comprehensive communication: it is important to have an exchange between all areas since each one has its share within the budget.
- Objective orientation: you don't draw a budget without considering what the objective of that organization is.
- Flexible application: it can design different scenarios. For example, if a more conservative scenario happens, I know what my minimum cash point is, or if it is a scenario beyond expectations, I know what my maximum cash point is.
- Recognition: If you reach your goals by the end of the year, you can use compensation policies to motivate people.
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The importance of financial planning
Financial Planning first allows you to make strategic decisions, as it makes it possible to make more informed decisions, making your business strategy work better.
This technique also allows organizations to grow sustainably, through a defined plan with investment schedules and administration of revenues, costs and expenses.
The analysis and application of investments at the right time also require knowing where to draw resources from, whether you should use third-party capital or equity.
In addition, planning makes it possible to identify better opportunities for optimizing activities. With it, it is possible to know at which points you can improve revenue or costs and expenses.
In conclusion, financial planning is essential for you to grow, or for your business to grow, reach another level or stay where it is.
Business financial planning
Business Financial Planning is similar to personal but is now focused on corporate finance.
Companies, in turn, generally have more organization, control and planning in their finances than families, since one of the main focuses of organizations is profit generation.
Therefore, we will understand below, which types of Financial Planning are used by companies:
Strategic Planning
Strategic planning is usually a function of the highest positions in the company, such as directors for example.
It defines guidelines such as mission, vision, values and policies, as well as long-term objectives based on the analysis of the internal and external environment.
Tactical Planning
Tactical planning is usually the responsibility of those in executive positions just below the directors.
Its function is to define the Financial Plan, Marketing Plan, Human Resources Plan and Supply and Production Plan.
Operational Planning
Operational planning is related to lower positions, such as department heads.
Its objective is the elaboration of operational procedures and their constant improvement.
When the goals at the base of the pyramid are met, this makes the goals at the top achieved, and so on.
What to do for your personal financial planning?
Follow the step by step to make good personal financial planning:
- Have a spreadsheet where you will write down all your expenses and expenses monthly. Be sure to write down anything, regardless of the value. Have discipline.
- Make lists before you leave the house when you go shopping so you don't get carried away by consumerism and buy things you don't need.
- Pay attention to any financial transaction where interest is applied, see if there is compound interest.
- Compare prices before buying. The price difference between competing stores can exceed 100 per cent!
- You have to be careful with your credit card, only pay a purchase if there is no interest. And know how to use your benefits, such as airline miles.
- Have goals, because they will direct where you should focus your efforts and, in addition, they are ways to measure how much you have evolved and how much still needs to be done to reach your goals.
- Keep your feet on the ground. If you expect to receive a certain amount, the ideal is to plan to live on less than that, in case of unforeseen circumstances you have a certain amount of time off to work, in addition, you will have an amount to save and invest.
- Learn to control your consumerism. We are tempted all the time by technological innovations, fashion and new trends. That's why it's necessary to know how to separate what you need from what the media wants you to buy.
- Learn about investments. The way you invest is decisive for your financial development.
What not to do in financial management?
We brought you a tip of seven things you should not do in finance. Are they:
Confusing business with personal finances
This is one of the main mistakes of small businesses and family businesses. It is common practice for the owner to mix personal money with the company's money.
It is extremely negative, as the person ends up not understanding exactly the level of capital that the company is generating nor its profitability.
Not having an inventory control
Having inventory management is essential for the organization's finances to work correctly. Inventory needs to be seen as standing money, and standing money is fatal to financial management.
The ideal is to find the balance point where you don't lose the sale and don't have a lot of money stopped. Not having this type of control is very common and very harmful to the business.
Not projecting cash flow
Most medium and large companies do not have a good projected cash flow. As a result, the company cannot understand what balance it will have to rotate over that period and this leads to errors in financial management.
This cash flow projection is very important to understand the capital balance and to understand the accumulated balance that the company will encounter over time.
Not making a financial plan
The absence of financial planning compromises the achievement of the company's biggest goals, especially those of long term.
Living on short-term finances results in a lack of financial strategy in search of results and real plans for your company.
Not knowing how to calculate cost and selling price
When pricing a product, those responsible do not take into account the cost of the merchandise or the price of the competition, much less the added value embedded in the product. Calculating this correctly is necessary to obtain the desired return.
To calculate the ideal selling price, it is essential to take into account the cost of the product, the added value that the product has and the consumer experience that is being provided to the customer.
Not standardizing financial management tools
This common mistake in financial management occurs when each financial control is being used in a different type of spreadsheet or tool. That is, there is no aggregating tool that makes all this talk and is shown more effectively.
Thus, it is ideal to use a standardized tool for recording all controls and organizing the financial management area.
Not knowing how to manage the profit made
Many organizations make a profit and don't know what to do with that profit, they don't know if they reinvest, if they redistribute, or how to do it. This is one of the most common mistakes in financial management.
The right thing is to analyze yourself to know where to invest, and then, make a perfect balance between the best investment and the best source of funding, to concisely allocate this capital.
Become a Leader!
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