Sample Financial Analysis on Importance of Preparing a Financial Plan

Financial Analysis

Importance of Preparing a Financial Plan

Financial planning involves a process long-term management of revenues and expenditure of the business to enable achievement of specific objectives.  Therefore a financial plan includes a comprehensive evaluation of an investor’s financial state and he plans to balance expenditure (Lichfield, Kettle & Whitbread, 2016). Undoubtedly, it has various benefits for the business including cash management, providing a long-range view of the business, prioritizing expenditure and measuring the progress of the institution.

Methods for Preparing a Financial Plan

There are different methods of operating a financial plan. Some of the methods include determining the objective, gathering and analyzing data; develop an implementation plan and monitoring the plan (Lichfield, Kettle & Whitbread, 2016). These methods, however, depend on the financial goals of the institution.

The 5 Steps in Creating Cash Budget

A cash budget helps to ensure that the firm or the departments will have enough capital to conduct their activities. there are five vital steps of preparing a cash budget that includes calculating the expenses, determining the income of the business, setting savings and debt payoff goals, recording the spending and tracking the progress and assessing the accounts payable (Enqvist, Graham & Nikkinen, 2014).  Once all these steps have been followed one will have a clear view of the cash flow budget and projections of the firm

Managing Accounts

To properly manage some of the essential accounts in the business including accounts receivable, payable and the inventory will involve determining credit allocation, establishing the payment method, monitoring collection, examining the liquidity of the receivables and accelerating cash receipt the receivables when necessary (Enqvist, Graham & Nikkinen, 2014). Understandably, the double entry system should be used to ensure all the amounts are recorded in their relevant accounts timely and accurately. For instance, through ensuring that accurate and correct double entry systems considered, it will help in ensuring all transactions are recorded.

 

 

 

References

Enqvist, J., Graham, M., & Nikkinen, J. (2014). The impact of working capital management on firm profitability in different business cycles: Evidence from Finland. Research in International Business and Finance32, 36-49.

Lichfield, N., Kettle, P., & Whitbread, M. (2016). Evaluation in the Planning Process: The Urban and Regional Planning Series (Vol. 10). Elsevier