A financial plan is a comprehensive evaluation of someone’s current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans.

In business, a financial plan refers to the three primary financial statements (Balance Sheet emplates, income statement, and cash flow statement) created within a business plan. Financial forecast or financial plan also refers to an annual projection of income and expenses for a company, division or department. A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company.

Financial planning is the task of determining how a business will afford to achieve its strategic goals and objectives. Usually, a company creates a Financial Plan immediately after the vision and objectives have been set. The Financial Plan describes each of the activities, resources, equipment and materials that are needed to achieve these objectives, as well as the timeframes involved.

The Financial Planning activity involves the following tasks:

• – Assess the business environment
• – Confirm the business vision and objectives
• – Identify the types of resources needed to achieve these objectives
• – Quantify the amount of resource (labor, equipment, materials)
• – Calculate the total cost of each type of resource
• – Summarize the costs to create a budget
• – Identify any risks and issues with the budget set

Performing Financial Planning is critical to the success of any organization. It provides the Business Plan with rigor, by confirming that the objectives set are achievable from a financial point of view. It also helps the CEO to set financial targets for the organization, and reward staff for meeting objectives within the budget set.

The role of financial planning includes three categories:

• – Strategic role of financial management
• – Objectives of financial management
• – The planning cycle

When drafting a financial plan, the company should establish the planning horizon, which is the time period of the plan, whether it be on a short-term (usually 12 months) or long-term (2–5 years) basis. Also, the individual projects and investment proposals of each operational unit within the company should be totaled and treated as one large project. This process is called aggregation.