“If you fail to plan, you plan to fail.”

Planning in business serves to be an essential task in order to figure out the path to be followed. A business entity stands on certain core pillars. One such strong pillar turns out to be Finance. It can be regarded as the lifeline of any business that uplifts an organization. Be it company formation,expansion, dealing with any project, employee hiring etc. finance is required in every step. Proper planning and management of finance turns out to be one of the most important tasks for any organization regardless of its size and nature. Many a times, the terms financial planning and budgeting are considered to be the same, but in reality, there exists a difference.If you are a business owner, then this is all you need to know about financial planning and budgeting.

What is Financial Planning and Budgeting?

A framework, comprehensive evaluation that explains the proper utilization and implementation of finance in different business domains for its future growth and development is referred to as financial planning. In simple words, we can say that financial planning is a definite task that determines how a business entity will achieve its strategic goals. It is important to start at an initial stage because established companies, over a course of time, might have to undergo financial restructuring. Let’s have a glance at the benefits that you will be able to derive by implementing a financial plan. A financial plan helps in:

  • Better management of finance
  • Gives a holistic view of the business
  • Create integrated strategies and interconnect them with financial growth

When it comes to financial budgeting, it looks into the matters of allocation of funds for a shorter duration. A financial budget is a financial plan for a specific period, generally a year. It generally focuses on the budget surplus or deficit at the end of the period.

Now, let’s have a look at the different types of Financial Planning and Budgeting.

Types of Financial Planning

1. Cash Flow Management

Cash-Flow gives insight regarding the inflow and outflow of cash while carrying out the business activities. This helps to keep a track on the cash-flow activities and change them accordingly if required.

2. Investment Management

This turns out to be another type of financial planning. Investments are meant to grow your money over a period of time. This includes investment in various domains like bonds, mutual funds, forex etc. It can be seen that investment management can help you uplift your financial scenario.

3. Insurance Planning

Insurance turns out to be another type of financial planning that is meant to cover unforeseen situations. Failing to plan for insurance can affect your financial planning to a great extent.

4. Tax Planning

Tax is one domain that no business can avoid. It becomes a mandate to pay corporate and individual taxes depending on the profits earned. Tax planning is another area where you need to look into when it comes into financial planning.

5. Real Estate Planning

Wealth creation can increase your financial position. Asset creation turns out to be an extremely important option with low risk and high investment return.

Types of Financial Budgeting

1. Zero-Based Budgeting

In this type, the baseline is considered as zero instead of previous year’s budget. The benefit of opting for zero-based budgeting is that it is cost-friendly but then involves huge documentation process.

2. Top-Down Budgeting

Here, the budget plan is prepared by the top officials which need to be followed by the lower level of management.

3. Bottom-Up Budgeting

This is the exact reverse of the earlier one. Here, the inputs are fetched from the lower-management and are considered while preparing the budget by the top management.

4. Activity-Based Budgeting

Here, the budget is prepared according to the organizational activities. Now, let’s get down to the process.

The Financial Planning Process

In order to initiate the financial planning process, you need to take the below-mention steps accordingly:

1. Analyze the Current Financial Scenario

The very first step is to determine the current financial scenario so as to analyze the future steps.

2. Draft Financial Goals

Next step, is to analyze and set the financial targets or goals within a specified duration. This should range from spending on the current business activities to extensive savings.

3. Structure the Course of Actions

Once the goals are set, the initial steps are to be figured out. This might include:

  • Continuation with the existing scenario
  • Change the current scenario
  • Take a new direction

All these need to be analyzed and evaluated properly to achieve the desired output.

4. Evaluate Alternatives

Before choosing the best course of action, research needs to be done in order to evaluate the alternatives. This gives a much wider scope and highlights the different ways to achieve the final goal.

5. Choose the Best and Implement the Final Plan

Once analyzed, you need to check for the best fit out of all the available alternatives and implement it accordingly.

6. Re-evaluate and Revise   

Well, the journey doesn’t end at the implementation stage. They are to be re-evaluated and revised to keep a track in order to meet the desired financial wants.

By now, you have got an idea about what financial planning and budgeting is all about, and how important it is for business entities. Now, dealing with such a tedious job gives birth to a lot of complexities. Minor errors in the financial statement can lead a business entity into big trouble. To avoid so, it is recommended to outsource the financial plan and budget to a professional expert who can help you in making the process easy. To have better clarity, do read the following points to know as to how an expert can help you.

Benefits of Availing for Financial Planning and Budgeting Services

  • Widens the scope of different options and alternatives available
  • Hiring professionals would minimize the count of errors
  • Structured financial plans for both short and long term
  • Better Risk Management
  • Saves training cost
  • Addressing monthly and annual budget in an effective way
  • Discover higher routes of savings

Wondering whom to contact? Don’t worry. Your financial guide is just below.

JAXA | Your Financial Guide

JAXA, since its inception, has been one of the top financial advisors in Dubai. We are a team of experts who provide financial assistance to our clients ranging from Accounting, Taxation, Financial planning, VAT, Audit services etc. Our financial experts will understand your business, provide financial advice, and cater to your needs accordingly. To have a word, do contact us today – we’d be glad to assist.

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