Budgeting is very important to any business as the budget serves as the financia

Question

Budgeting is very important to any business as the budget serves as the financial “roadmap” to help guide you towards your goals. Just as it is important for you to adhere to a budget in your household, a business must also develop and adhere to a budget. Budgets are part of the financial plan which, in turn, is part of an organization’s overall strategic plan.

1. In your first post, answer the following questions:

What is the financial plan and why is it important? How does the financial plan factor into the overall strategic plan of an organization?

Locate the mission statement of an existing health care organization and share it in your response. Do you believe the mission statement you have chosen is effective? Why or why not? Without knowing specifically what the goals are of this organization’s financial plan, how do you suppose the goals would affect the mission statement? Be sure to include the reference citation for the organization where you pulled the mission statement.

2. Reply to at least two of your peers and comment on the mission statements they have profiled in their posts. Please offer feedback on the comments that your peer has made regarding the financial plan and how it fits into the organization.

Explanation / Answer

1.

Financial plan refers to the estimation of the financial requirements of a firm and planning the resource allocation accordingly for the smooth flow of the activities it undergoes.

A proper financial planning helps to determine the company's financial requirements for the long-term and short-term goals and meet them.

Financial planning is important due to the following reasons:

A good financial plan can help the company understand its financial condition and make appropriate decisions to improve its financials.

It can help the company manage its income. This will help the company understand how much money is required for expenses, how much can be saved and how much is paid as tax.

A financial plan helps in understanding the overall risk one can take in investments. Investment decisions can be taken easily with a good financial plan in place.

Financial planning can help in increasing cashflows. It can help the company manage expenses by careful spending and budgeting. Cashflow increase can increase capital which will improve the company's financial condition.

It can also help in managing the company's liquidity requirements. Liquid assets are necessary for day to day operations or for emergencies.

Assets and liabilities go hand in hand. Assets are usually financed by liabilities. To maintain this relationship a good financial plan is required.

Strategic Planning is a process used to identify business goals and find ways to achieve those goals. Financial and Strategic planning go hand in hand. They are dependent on each other.

Let us consider an example where according to the company's strategy, it should invest in projects A, B and C to increase business. A requires an investment of $1,000, B requires $2,000 and C requires $3,000. The budget is only $1,500. Therefore, the company is restricted and can only invest in A. Strategic planning helps the business grow. It could increase efficiency, decrease costs and increase revenue. In this case, financial plans could be altered so that necessary and best investment option could be vested.

Thus, strategic and financial planning are dependent on each other. A change in one can cause a change in the other. A budget change can change managerial decisions and before a strategic change one needs to check the budget.

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