Financial planning and budgeting

Financial planning

Financial Planning In order to ensure that the future needs of money are met, financial planning is defined as a process that contributes to providing assistance in making appropriate decisions while dealing with money; Which leads to the achievement of the goals of individuals or establishments.

Among other definitions of financial planning, it is a section of financial management, and it is a means of defining procedures, policies, objectives, and financial budgets used in dealing with financial activities.


The budget (English: Budgeting) is the means used to express the basic needs of resources, such as materials, capital, and people, all of which contribute to achieving a set of goals based on time stages, and the budget is defined as a financial tool that contributes to providing estimates about expenditures and revenues. Expected during a period of time, usually in the future. Another definition of the budget is a process used to calculate the amount of money that can be obtained or saved during a certain period of time, and the budget depends on planning to determine the method used to spend these funds.

Preparing budgets

The success of preparing budgets depends on the application of a set of steps, the most important of which are:

Updating budget assumptions: It is a review of all assumptions related to the company's work environment that are the basis for the budget, and it can also be updated when needed.

Determining the available funding: It is the allocation of a sum of money that is likely to be used to finance the company's own operations, and it is important that it be available during the time period associated with preparing the budget.

Cost points: It is to determine the nature of the costs incurred by the scope of work activities during the time period of the next budget, and it includes determining the financial value of these costs, and the type and level of activities that will be incurred.

Budget creation: It is to obtain all the information related to the basic budget for the previous year, and then update it based on adding all the actual expenditures incurred in the current year, taking care to provide information about the nature of the expected funding during the next fiscal year.

Obtaining revenue forecasts: obtaining expected information about the company's revenue percentage; By providing the sales manager with it, and then verifying its reality through the CEO, and distributing this information to the heads of the administrative departments; In order to be used as a basis for preparing budgets for their departments.

Obtaining the budgets of the administrative departments: it is to obtain all the financial information related to the budgets of all the departments of the company; In order to study it to ensure that it does not contain any errors, and then compare it with all other financial statements.

Financial budget review: it is the meeting of all members of the management team; To review all items of the financial budget; With the aim of shedding light on the expected constraints, and any constraints that appear as a result of the financing, and then the budget is returned to the team of accountants, who worked on its creation; in order to make the appropriate modifications to it.

Budget loading: is the provision of budget information within the financial programs; Which contributes to obtaining the financial budget based on actual reports.

Types of financial planning

Financial planning is divided into a group of types, and it is classified in terms of the duration of the financial plan into two types:

Long-term financial planning: It is planning that helps to prepare financial policies with a long period of time, ranging from two to ten years, and the company's activity contributes to determining the time period that must be covered depending on the financial plan, and long-term financial planning is often concerned with the following matters:

  • How to implement investment plans.
  • Research on new products. 
  • The right sources of money. Loan repayment method.
  • The ability to merge with other companies.

Short-term financial planning: It is the planning that contributes to the preparation of financial statements that include expected financial results, within a short period of time up to about a year or less. These financial statements constitute the income statement, balance sheet, and cash flow statement.

Financial planning stages

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

Determining all the main and subsidiary goals: It is the first stage of the financial planning stages, and it contributes to setting the main and subsidiary financial goals that are concerned with applying the best use of capital; In order to contribute to enhancing the efficiency of productive factors, and supporting the resources available in the company.

Preparing financial policies: it is the second stage of financial planning, and it is considered the main guide for employees in financial management; It helps them to take appropriate decisions, and a set of necessary matters must be taken into account when preparing these policies, such as achieving the interests of the company, and not appearing in conflict with other policies of the various departments of the company; It is important that it be consistent with the general policies and objectives set; Which contributes to its achievement, not delaying or obstructing it.

Transforming financial policies into detailed procedures: This is the stage that aims to enable accurate implementation of financial policies; By converting them into detailed procedures that help simplify administrative processes.

Enhancing sufficient flexibility to implement financial procedures: it is the last stage of the financial planning stages, and it depends on the management’s role in providing appropriate adjustments or changes to the short-term financial goals and the company’s financial policies; in order to adapt to the changing conditions that affect it.

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