Financial planning enables you to actually have direction and meaning to your financial decisions. It enhances your understanding as to how each financial decision you make affects other areas of your finances and, indeed, your organisation and its ability to function and to achieve the organisational goals. For instance, purchasing particular investment asset might help you pay off faster a debt, but also, it might delay – even significantly – other preferred activities.

The ability to perennially view the organisational financial decisions as part of a whole, would allow you to assess its short and long-term effects on the organisational goals. Thus, it would also enable adapting more easily to changes and would render better assurance that your goals are on track.

Financial planning determines if and how the organisation would be able to afford achieving its strategic goals and objectives. Therefore, it might be useful for the organisation to create its Financial Plan immediately after the vision and objectives have been set, refined or reaffirmed. The Financial Plan describes, in money-terms, each of the activities, resources, equipment and materials that are needed to achieve these objectives – and the timeframes required to do so.

Organisational Financial Planning should assess the immediate environment within which the organisation operates and set means to ensure that its course of action confirms the organisational vision and objectives in view of the various aspects of the operational environment. Naturally, it should also identify the types of resources needed to achieve these objectives and consequently, quantify the magnitude of resources (e.g., labour, equipment, materials, etc.) required – and available – while calculating the total cost of each type of resources. This will ensue in summarising the costs so as to create a budget which should, of course, contain identification of any risks and issues associated with the budget and its implementation plan and contingency measures.

Performing Financial Planning is critical to the success of any organisation. It renders the organisational strategic plan rigorous as it ascertains that the objectives set are achievable from a financial point of view. It would also enable the organisation to set financial targets and to institute system or reward accorded to staff for meeting objectives within the budget constraints.

In other words, the financial plan serves as a comprehensive evaluation of the organisation and its operational and developmental potentials and the future financial state by means of currently known variables, predicting also future cash flows, asset values and withdrawal plans.

Taxation issues are also addressed by the financial plan and thus the organisation enjoys enhanced ability to plan and execute asset estimates along with directions and magnitudes of growth.

The establishment of financial plan is equally important for independent, for-profit entities, as well as for subsidised organisations (e.g., hospitals or universities). This is because a good financial plan can alert the organisation to changes that must be made to ensure smooth transition through financial phases, such as decrease in spending or change of asset allocation (and in case of public institutions like universities or hospitals – changes in the contributions by the state). Financial plans should also be fluid, with occasional updates when financial changes occur.

While the financial plan sets the general outlines that would govern the organisational cash flow, periodic assessments must be made in order to enable on-going control of the organisational asset management. This is particularly valid for state-supported organisations where unforeseeable changes in state subsidies might create negative cash flow. The financial plan can show the extent to which increasing extra-budgetary activities might be necessary not only to generate more revenue but also as precautions.

Identifying clear, achievable goals is clearly understood as a crucial part of devising financial plan. It must be stressed, in this regard, that a financial goal is in fact specific amount of money needed for a specific purchase, service or expenditure that must be made at a definite date. Making goals precise allows the determination of how much is required to ensure meeting of future financial commitments, while enabling on-going progress tracking.

Financial goals can be grouped into short-term, mid-term and long-term goals. Short-term goals are expected to be achieved in under a year; mid-term in one to five years and long-term goals, in five years or more. Room must be made, within the framework of short-term goals, for exigencies.