5-Step process financial planning business EFFICIENCY

This article Lac Viet Computing will help businesses understand the role of financial planning businessat the same time providing detailed instructions on the steps to deploy, support tools, the trend of the modern financial help business optimal financial strategy.

The main content that the article will be presented include:

• Financial planning is and why is it important?
• The step financial planning from basic to advanced
• Software tool support financial planning modern
• Challenges in financial planning
• Trends financial planning business in the future

After reading the article, businesses will have a comprehensive perspective on how to build a financial strategy effective from that help optimize cash flow, cost control, sustainable growth, minimize risks in the business environment fluctuations.

1. Financial planning is what?

1.1 Workflow Definition

Financial planning business is the process of developing, implementing and monitoring the financial plan to ensure financial stability, optimize capital, promote sustainable growth. This is an important part in business management to help the organization has long-term perspective on cash flow, budgets, profit, financial risk.

A financial plan, it will help the business determine the financial resources required to achieve business goals, take strategic decisions about investment, market expansion and to manage cash flow effectively.

Distinguish financial planning with financial management daily

1.2 Role of financial planning in business

• Control cash flow: Ensure the business has enough cash flow to maintain operations and development.
• Optimize capital to Help businesses determine the proportion of equity capital, loan capital, rational, maximizing efficient use of capital.
• Support strategic decisions: Provide financial data to business leaders make decisions on investment, expansion, merger, sale or adjust business strategy.
• Strengthen the management of financial risks: Help businesses predict risks of market volatility, exchange rates, interest expense for the project deal.
• Optimal cost profit enhancement: Support construction business plan reasonable budget, cut unnecessary costs, improve financial performance.

2. Types of financial planning in business

2.1. Financial planning strategy

This is a long-term plan for 3-5 years to help businesses identify vision financial development orientation. Financial planning strategies include:

• Plan long-term investment: Identify the investments in fixed assets, technology, expand market.
• Orientation revenue growth/profit: Business set financial goals, such as sales targets, profit margin expectations, the rate of return on investment (ROI).
• Strategy to mobilize capital: Identify sources of capital from reinvested profits, bank loans, issuance of stock, or call capital from investment funds.

For example, A technology company can plan financial strategy to expanding to international markets, invest in R&D or new product development, with a target revenue growth of 20% per year.

2.2. Financial planning short term

Is the plan from 1-3 years, the focus is on managing cash flow, optimal budget, cost control. Includes:

• Cash flow forecast monthly, quarterly, to ensure businesses have enough liquidity to pay salaries, operating costs, debt, loan.
• Set annual budget: allocation of costs for production, marketing, hr, R&D stars for reasonable efficiency.
• Cost control: assess the effective use of the budget, cut expenses not necessary.

2.3. Financial planning in each department

Each department in the enterprise should plan financial planning business to own to ensure appropriate resources for their activities:

• Financial planning for production: Calculate the cost of materials, labor costs, plans to expand the factory.
• Financial planning for marketing: Determine the advertising budget, marketing strategy, ROI on each communication channel.
• Financial planning for personnel: Forecast salary, employee benefits, training costs, recruitment.
• Financial planning for research & development (R&D): investment planning to technology, research new products to increase competitiveness.

For example: A company e-commerce can allocate 40% of the budget of marketing on advertising Google Ads, 30% on Facebook Ads and 30% for SEO, based on performance data previous ads.

3. The factors that affect financial planning business

3.1. The situation macroeconomic

• Inflation can reduce the value of currency, affects the purchasing power of customers.
• Fluctuations in interest rates impact the cost of borrowed funds, financial strategy of the business.
• Tax policy can affect profitable strategy, investment plans and capital structure.

For example, When interest rates increase, businesses can consider restructuring debt or seeking funds instead to reduce the financial pressure.

3.2. Capital needs and funding sources

• Businesses need to evaluate the possibility of raising capital from equity capital, bank loans, issuance of stock or capital invested.
• The selection of the loan rate reasonable help optimize financial costs that do not increase the burden of debt.

For example, A startup technology can choose to call capital from venture capital funds instead of bank loans to reduce the financial pressure in the early stages.

3.3. Financial risk and how to control

• Exchange rate fluctuations may affect export sales, or cost of imported raw materials.
• Liquidity risk: If the business does not control the flow of money, good may fall into the situation of not enough capital to maintain operations.
• Interest expense: If the business has too much debt on the loan with high interest rates, profits can be seriously affected.

Solution: Businesses can use the tool to manage financial risk, insurance, financial or risk prevention by the derivative contract.

4. 5-Step process financial planning business EFFICIENCY

Financial planning business is a systematic process to help business to ensure resources financial stability to achieve the business goals. Here are the important steps that businesses should take to build a financial plan effective.

Step 1. Reviews the financial situation of current business

Before planning, finance, business need to understand the financial condition current to the strategic fit. This assessment is usually based on the analysis of financial statements and key metrics.

Analysis of financial statements: Three financial statements important to help businesses look at the overall financial health including:

• Balance sheet: Shows the total assets, liabilities, equity of the business at a specific point in time.
• Income report: tracking the revenue, cost profit in a certain period of time.
• Statements of cash flows: Provides information about cash flow in/out help assess solvency, cash flow management efficiency.

Determine the index of important financial: Enterprises should track the following metrics to evaluate financial performance:

• Liquidity ratios: Measure the ability to pay its short term debts.
• Profit margin (ROS, ROA, ROE): assess efficient use of capital to generate profits.
• The ratio of debt/equity: Help determine the level of financial risk.
• Cycle revolving funds: analysis speed rotation of capital in business activity.

Compared to industry standard and competitors: The comparison of financial businesses in the same industry to help businesses assess the level of competition, find out its strengths and weaknesses to improve financial strategy.

Step 2. Identify financial goals and strategy development

After assessing the current financial businesses need to set goals specific financial, construction, development strategy to achieve that goal.

Define financial goals may include:

• Revenue growth/profit: Determine the rate of growth desired (for example: 15%/year).
• Management cost-effective: Cut operating costs without affecting the quality of products/services.
• Optimize cash flow: maintaining solvency, maintain positive cash flow.
• Improved financial performance: Achieve rates of return on assets (ROA) or equity (ROE) higher.

Planning revenue growth

• Market expansion or development, product/service, new.
• Optimized pricing strategies to increase sales without affecting profits.
• Build marketing campaigns, sales more effective.

Strategic cost management

• Reviews, cost optimization, manufacturing, commissioning, personnel.
• Search suppliers have better prices or apply technology to save cost.
• Enhanced automation to reduce labor costs.

Step 3. Budgeting financial details

Budgets are important tools help business management financial plan to ensure financial goals can be realized.

Construction budget annual operating: Financial budget is divided into three main categories:

• The capital budget for the long-term investment as the purchase of fixed assets, upgrading technology, expanding the factory.
• Budget operating costs: this includes the staff costs, marketing costs, operating costs daily.
• Budget cash flow: Forecast cash flow in and cash flow out to ensure solvency, avoid the shortage of capital.

Allocate proper budget

• Determine the rate of spending is suitable for each item, avoid allocating too much budget on a field that ignores the other important factors.
• Set of reserves to be able to cope with financial risks surprises.

Step 4. Financial forecasting and risk management

Financial forecasting is an important part of financial planning, to help businesses prepare before the business scenario different.

Use the model to forecast financial: Forecast models to help businesses analyze financial trends in the future, including:

• Model forecasts revenue: Based on sales data, market trends, economic factors, macro.
• The model predicted cost: determines cost of operations in the future based on financial performance, current.
• Forecasting models cash flow: to Help businesses ensure liquidity in every situation.

Construction of the financial scenario different: Business should prepare many financial scenarios to cope with the fluctuations unforeseen:

• Best scenario: When revenue growth is strong, high profit.
• Scenario average: When business activity, stability, achieved the right planning.
• The worst scenario: When markets decline, the revenue decline, the need to cut cost or adjusted financial strategy.

Risk management financial

• Diversify sources of capital: Avoid excessive dependence on borrowed funds or a source of financing only.
• Manage exchange rate risks, interest rate: import export Business needs to forecast the price action to minimize the impact to profit.
• Insurance financial: Business can use the insurance contract or instrument prevention of financial risks.

Step 5. Track, measure and adjust financial plans

A financial plan not only be set once, which should be monitored and adjusted regularly to match with the real situation.

Periodically reviews the financial performance

• Businesses need to perform reviews quarterly or annually to see financial plans in the right direction or not.
• Analyze variances between budget and actual, determine the cause deviations timely adjustment.

Adjusted financial strategy when necessary

• When there is a change in the market, customer needs, or financial situation, internal business needs flexibility to adjust the financial plan.
• For example, If the cost of raw materials, spike, businesses can adjust strategic selling price or find another provider to keep profits stable.

Using the financial index important (KPI financial)

• Net profit margin (Net Profit Margin)
• Rate of return on investment (ROI)
• The ratio of debt to equity (Debt-to-Equity Ratio)
• Speed revolving working capital

The measurement of financial indicators helps business to quickly detect problems, from which there is strategy adjusted effective.

5. Tool support financial planning business

Systems such as ERP integrated financial and AI in financial analysis are become the inevitable trend help the business decision-making faster, more accurate, more adaptable, more flexible with the fluctuations of the market.

5.1. ERP software integrated financial management

System ERP (Enterprise Resource Planning) is a total solution that provides business, financial management, budget, accounting, cash flows in a synchronized way. Instead of using many individual software, ERP integrates all the financial processes into a single system, help businesses enhance accuracy, reduce errors, increase efficiency financial decisions.

The key benefits of ERP in financial planning business include:

• Automate financial processes: business Support, set budgets, track revenue, cost, debt management, receivables, payables, control the flow of money.
• Integrated financial data in real time: Provide a detailed report of the financial situation of the business, helping managers make decisions fast more accurate.
• Support financial forecasting: Based on historical data, market trends, ERP help to forecast revenue, costs, profits to help businesses prepare financial plans accordingly.
• Minimize financial risks: control condition exceeds the budget, early warning when there are signs of financial risks, help businesses maintain good liquidity.
• Support compliance with the financial regulations, tax: ERP helps businesses automatically calculate tax, financial reporting according to regulations, ensuring financial transparency.

The ERP software popular support financial management

• LV-DX Accounting: ERP solutions finance of Vietnam, helping business management, accounting, budgets, cash flow, financial reporting quickly and accurately.
• SAP ERP: ERP System strong, which is widely used in the big business support, financial management, accounting, risk management, data analysis.
• Oracle ERP: business Support in financial planning, cash flow projections, budget control, in accordance with the multinational corporations.
• Microsoft Dynamics 365: Integration of ERP with AI, data analytics help businesses optimize financial strategy, cash flow management efficiency.

5.2. Finance AI Agent of Lac – tool, AI support financial planning business

Artificial intelligence (AI) is changing the way businesses approach financial planning. Instead of relying only on historical data, the AI system has the ability to analyze a series of factors impact from market, economic trends, customer behavior help construction business financial planning more accurate.

Finance AI Agent of Lac Viet is a tool AI help business auto,financial analysis, trend forecasting and decision support financial strategy.

Finance AI Agent to help businesses solve challenges how?

• Detection financial risk early: Analyze financial data in real time, alerting the business if there are signs of weight loss for cash flow. Identifying liquidity risk, bad debt, fluctuations in the cost to businesses to have a plan to respond in a timely manner.
• Financial forecast, optimize cash flow: Application AI to forecast trends in revenue, costs, profits based on market data and financial history. Give recommendations to help businesses optimize the budget, improve performance, use of capital.
• Proposed financial solutions smart: Support automated business financial planning based on real data help managers optimize investment strategies, allocate capital rationally. Analyze the financial performance of each project, to help businesses choose to filter those investments yield the highest profit.
• Integration with ERP and financial system business: Finance AI Agent can connect to the ERP system as LV-DX Accounting, SAP, Oracle, helps to integrate financial data from multiple sources into a single platform. Support automatically reporting, financial analysis, budget tracking, KPI finance without handle manually.
• Enhance effective financial decisions: AI helps businesses increase speed, financial analysis, minimize errors due to human help leadership decisions quickly and more accurately. Given the prediction model with many different scenarios, to help businesses strategically respond flexibly to the financial volatility.

If the business wants to sustainable growth, maintain financial stability, optimize business performance, then the application of a strategy financial planning business basically leveraging technology modern finance is the key to success. Let's start building the plan of your finance today to ensure a solid future and promising.