Planswell — Objectives of Financial Planning

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Financial planning is the process of determining the capital required, the future needs of the business or project, and its competition in terms of required resources. It has to encompass the trajectory of investments, funds generation and efficient administration of these funds.

It is usually done for projects whose life is more than 4–5 years. By right Planswell decision, these can be done either by experience or with the help of a reliable financial advisor.

Here are the five prominent objectives of financial planning

Estimating total required capital

The topmost step in financial planning is to find out the actual investment or capital required. The requirement for capital can be divided into two categories -

a. Short-term capital requirement

b. Long-term capital requirement

This requirement depends on various factors like current and fixed assets advertisement and operation cost.

Finding the capital structure of the business

A capital structure of a business is considered the organization of total internal or external debt to the capital of stakeholders. Financial planning includes the decision based on the debt to equity ratio which doesn’t affect the capital structure of a business.

Counter strategies for risks

Financial planning determines the risks and issues associated with the plan of business. The counter-strategies are prepared to counter the identified issues when issues are identified at the planning stage. Thus, it ensures the smooth completion of the project. It also saves a lot of time and money.

Ignore excess generation of funds

Unnecessary increases and decreases in funds are always expensive deals for businesses. The most important objective of financial planning is to protect the business from raising funds. Excess funds are just an idle asset of a business and have their own cost.

Finding the timing and sources of funds

Finding sources and timing of funds is a tricky task. According to business needs, the necessary funds should be available at the right time. Financial planning helps in finding out the inexpensive source of funds.

Reach out to Planswell for more in-depth knowledge on financial planning, it’s objects and the impact it can create to your overall living.