Financial planning and budgeting

Financial planning

Financial planning is a method based on the use of future planning to track the funds of individuals or enterprises, in order to ensure that the future needs of money are met, and financial planning is defined as a process that helps to help make appropriate decisions during dealing. with money, leading to the achievement of the goals of individuals or enterprises. Another definition of financial planning is financial management, and is a means of determining the procedures, policies, objectives, and financial balances used to deal with financial activities.


Budget is the means used to express basic resource needs, such as materials, capital, and individuals, all of which contribute to the achievement of a set of time-based objectives, defined as a financial instrument that contributes to estimates of expenditures and revenues. expected during a period of time, often in the future. Another budget tariff is a process used to calculate how much money can be obtained, or saved over a given period of time, and the budget depends on planning to determine how these funds are spent.

Setting up budgets

Preparing budgets correctly contributes to getting the required results, and the success of budgeting depends on the implementation of a set of steps, the most important of which are:

  • Update budget assumptions: Review all the assumptions about the company's work environment that are the basis of the budget, and can be updated when needed.
  • Determining available funding: The allocation of a financial amount likely to be used to finance the company's operations, and it is important that it be available during the budget ary period.
  • Cost points: Determine the nature of the costs involved in the scope of the business activities during the next budget period, and include determining the financial value of these costs, and the type and level of activities you will incur.
  • Budget creation: Get all the information about the base budget for the previous year, and then update it based on the addition of all actual expenditures resulting from the current year, taking care to provide information about the nature of the expected financing during the next fiscal year.
  • Obtaining revenue forecasts: obtaining expected information about the company's revenue ratio by providing its sales manager, and then verifying its realism through the CEO, and distributing this information to the heads of management departments, in order to use it as the basis for preparing Budgets for their sections.
  • Access to management department balances: obtain all the financial information on the balances of all divisions of the company, in order to study them to make sure that they do not contain any errors, and then compare them with all other financial statements.
  • Budget review: The meeting of all members of the management team, in order to review all budget items, in order to highlight the expected restrictions, and any restrictions that arise as a result of funding, and then the return of the budget to the team of accountants, who worked on its creation, in order to make adjustments occasion upon her.
  • Budget load: Provide budget information within financial programs, which contributes to obtaining the budget based on actual reports.

Types of financial planning

Financial planning is divided into a variety of types, and is classified in terms of the time period of the financial plan into two types:

  • Long-term financial planning:Planning that helps to develop long-term fiscal policies, ranging from two to ten years, and the company's activity contributes to determining how long it should be covered based on the financial plan, and often cares about long-term financial planning. The term of the following:
    • How to implement investment guidelines.
    • Research on new products.
    • The right sources for money.
    • The way loans are repaid.
    • The ability to merge with other companies.
  • Short-term financial planning: Planning that contributes to the preparation of financial lists that include expected financial results, within a short period of time of about a year or less, and these financial lists form both the income list, the balance sheet list, and the list of flows. Cash, short-term financial planning is more accurate than long-term financial planning, because of the difficulty of predicting the financial situation of many years, i.e. the long time period compared to the short time period of short-term financial planning.

Stages of financial planning

The success of the implementation of financial planning in various companies depends on the implementation of a range of stages:

  • Identifying all the main and sub-objectives: the first stage of financial planning, and contribute to the development of the main and sub-financial objectives that are concerned with the best use of capital, in order to contribute to enhancing the efficiency of productive factors, and supporting the resources available in the company.
  • Financial policy preparation: The second phase of financial planning, and is the main guide for employees in financial management, helping them to make the right decisions, and a range of things must be taken into account in the preparation of these policies, such as the realization of the interests of the company, and the absence of a conflict with Other policies for the company's diverse divisions, as it is important to comply with the policies and objectives set, which contribute to their achievement and not to postpone or hinder them.
  • Transforming fiscal policies into detailed procedures: the stage that aims to enable the implementation of fiscal policies accurately by transforming them into detailed procedures that help simplify administrative processes.
  • Enhancing flexibility to implement financial actions: the last stage of financial planning, and depends on the role of management in delivering appropriate adjustments or changes to the short-term financial objectives and financial policies of the company, to conform to the changing circumstances affecting In it.