Financial Planning And Financial Forecasting. The Difference.

Financial planning is the process of determining future action on the formation and use of financial resources. The purpose of financial planning is ensuring the reproduction process as appropriate in terms of volume and structure of financial resources. The following types of plans:
1) strategic plans, i.e. plans for general business development. In the financial aspect of these plans one defines the most important financial ratios and proportions of reproduction, characterized by investment strategies and opportunities for reinvestment and savings. Strategic plans define the scope and structure of the financial resources necessary for the functioning of the enterprise. Current plans are developed on the base of the strategic ones by means of their specification. If the strategic plan provides an indicative list of financial resources, their extent and direction, than the mutual agreement of each type of attachment with their sources of funding is carried out in the network of the ongoing planning, the effectiveness of each possible source of funding is studied, and financial evaluation of the major activities of the enterprise and the ways of obtaining income is carried out.
2)Operational plans , i.e. a short-term tactical plans that are directly related to the achievement of the company (production plan, plan of purchasing raw materials, etc.).

Any action plan should be accompanied by an estimate of expenditures – budget formulation, which is a quantitative embodiment of the plan, describing the income and expenses for a specific time and resource requirements to achieve a given plan targets. The budget is created to perform the proposed action that defines its role as a basis for monitoring and evaluating the performance of the company.
The difference of financial forecasting from financial planning is that in predicting the estimated potential future financial implications of decisions and external factors, and the planning of fixed financial performance, which the company aspires to achieve in future. Financial prediction is the basis for financial planning at the plant (i.e. of strategic, current and operational plans) and financial budgeting (i.e., an overall financial and operational budgets). The starting point of financial forecasting is the forecast of sales and the corresponding costs; endpoint and the target – calculation of the external financing requirements. The main stages of forecasting funding requirements are as follows:

Working out the forecast sales statistics and other available methods. Predicting variable costs. Predicting investment in fixed assets and working capital necessary to achieve the necessary volume of sales. Calculation of the external financing needs and finding appropriate sources. The first stage is based on marketing research. Others focus on the financiers. There are two main methods of financial forecasting. One of them is based on the concept of cash flow and reduces essentially to the calculation of the financial part of the business plan.

World crisis has made many people taking care of their retirement and future, look for ways to save funds and retirement financial planners. Those who are concerned about their retirement well-being, are invited to go to this professional financial planner site – the proper place online to get professional pieces of advice and find out how organizing personal finances is made.

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