Financial planning tools and concepts ppt is a plan that will be used to provide you with a better understanding of the different financial instruments that are available for use. It will take into account your present financial status as well as your future plans. By using this tool, you will have a clear picture of how much you have saved up so far so as to achieve your investment goals. This means you will have a definite limit as to how much you can invest as well as how long it will take for you to achieve those investment goals. Financial planning PPT – It is a set of processes that aims to provide a comprehensive financial profile built by using a set of basic financial planning tools. The main objective of the financial plan is to serve as the baseline for making financial decisions rather than serving as something that can be updated regularly.
Importance of Financial Planning
Financial Planning is process of framing objectives, policies, procedures, programmes and budgets regarding the financial activities of a concern. This ensures effective and adequate financial and investment policies. The importance can be outlined as-
- Adequate funds have to be ensured.
- Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.
- Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning.
- Financial Planning helps in making growth and expansion programmes which helps in long-run survival of the company.
- Financial Planning reduces uncertainties with regards to changing market trends which can be faced easily through enough funds.
- Financial Planning helps in reducing the uncertainties which can be a hindrance to growth of the company. This helps in ensuring stability an d profitability in concern.
Financial transparency and planning
Financial transparency shows how accumulated costs are transferred to service consuming fees and how actuals correlate to plans. Financial planning ensures:
- Reserving future cash flow to business technology elements (budgeting)
- Measuring the actual spend by business technology elements and comparing actuals to planned costs to identify deviations and suggest corrective actions (controlling)
- Allocation of business technology costs to business units and -capabilities as service fees (invoicing)
Cost transparency is not easy to achieve. Spends accumulate on general ledger level while budgeting is done on business technology element level and business is invoiced on a higher business technology services level. The best practices to tackle cost transparency are using a standardised taxonomy and grouping costs to pre-defined cost groups and services. As well as utilising a rule-based cost modelling system to automate calculations.
Financial feasibility
Financial feasibility provides feasibility analysis about proposed, on-going and completed development initiatives and feasibility of on-going services throughout their lifecycle by assessing:
- Financial feasibility of proposed development initiatives with the demand and development portfolio steering. Analysis is based on a business case with payback and/or net present value calculation (Pre-feasibility)
- Financial feasibility of an on-going development initiative with the project steering. Analysis will help to make go/no-go decisions to identify initiatives that should not be continued even with high sunk costs
- Financial feasibility of completed initiative by measuring the realised costs and business benefits and comparing them to the previously approved business case. The analysis is important for lessons learned purposes (Post-feasibility)
Financial steering
Financial steering contributes to strategic planning and service portfolio steering by providing insights about optimal allocation of financial resources. It provides insights on:
- Cost levels by making benchmarking total cost levels and more specific service cost levels with similar organisations. Benchmarking justifies cost saving initiatives or additional investments (Benchmarking)
- Right balance between build and run as well as between investments (capex) and operational costs (opex). These ratios are highly dependent on current business status, but usually organisations aim at saving operational costs and investing more on development (Build/run ratio)
- Right allocation of money to different value streams. The value stream ranking high in created or expected business value should get more money and vice versa. Value streams and their investment profile is a key topic in strategic planning. Money allocation creates demand while cost allocation is result of supply (Demand-supply balance)
- Business value of the on-going services to justify further investment or service retirement. Traditional business case calculation is not adequate as it is targeted for investment calculation, while the on-going business value calculation is based on current asset value of the business technology.
Financial management should not be seen only as a function operated by finance. To be effective, it requires contributions and collaboration from multiple business functions, including business technology, and is enabled by using standardised models, terminology and ways of working. Transparency, accurate planning and treating financial management as a strategic capability allows businesses to create and demonstrate the value of technology.
Mint
Mint is a great free tool that helps you budget your money mainly by allowing you to connect your bank accounts to the budgeting software, which then enables Mint to keep track of your spending on your accounts and any associated cards.
Mint has a nice feature that allows you to “set” your budget, while it tracks all of your expenses for you. On top of that, the tool will automatically separate your expenses into categories it assumes to be the correct fit for. If something shows up in the wrong category, no problem, you are able to go in and make the correction to the category placement. What’s even better is that Mint continually learns to categorize better according to the corrections you make to it.
One of the inherent downsides to using Mint as a financial tool for free is that you will be shown ads related to credit cards and loans while you use their budgeting tool. But with that being said, the budgeting software is 100 percent free, and it doesn’t get much better than free.
You Need A Budget (YNAB)
You Need A Budget (YNAB) is another powerful budgeting tool. If you are looking for ways to be more active and involved with your finances, while still having some automation in place, this tool is perfect for you.
Similar to Mint, with YNAB you’re able to connect your bank account(s), but you are responsible for categorizing each transaction that comes through.
A lot of personal finance influencers and experts really seem to enjoy using this tool over some of the others. YNAB does a really good job of keeping you on track with your money and it also comes with educational content and videos that teach you how to think about cash flow management. The educational side of YNAB is one that really stood out to me when I was initially exploring options for budgeting tools.
Financial Planning Concepts
Generally, the concept of financial planning revolves around the following;
- Cash flow management
- Investment management
- Debt Management
- Tax Management
#1. Cash Flow Management
This involves managing the cash flow of your business. In other words, keeping an eye on the inflow and outflow of funds. To properly do this, you need to estimate your present and future expenditure and keep the expenses under control because that’s the fastest way to achieving your financial goals. In addition, it involves creating a reserve of emergency funds for unforeseen circumstances. I call it, “your life support”.
#2. Investment Management
To achieve those financial goals, you’ve set, you need to invest in various investment instruments throughout your life. Doing the right investment is the surest way to accumulate enough funds to spend on the very important aspects of your life.
#3. Debt Management
This involves managing all the cash you borrowed in time past. Although they say you don’t always pay off all your debts, the best thing is to keep it at a minimal level. If your business can’t afford to sustain an expansion or a diversification into an entirely new product. Then there’s no need going to borrow money for an expansion in the first place. Putting your debts in check helps you control the amount of money your business spends externally.
#4. Tax Management
Paying of taxes is a major factor in your expenditure list. Hence, to maximize your real income, tax exemption and tax liability is of utmost importance. Consult investment planners or tax consultants to recommend the best tax saving instruments you can invest in, through various government and private investment scheme.
Conclusion:
The unfortunate reality is that most people struggle to find clarity when it comes to their money and their financial future. In addition to not having a good understanding of where or exactly how to get started when it comes to managing their money, they feel overwhelmed with the number of resources that are available. Most of the time, people resort to using paid alternatives, while free options exist and can do just as good of a job, if not better—solely on the premise that you save money right away. I think it’s safe to say that money managing principles are key to having a good financial situation.