Financial Management DB1
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Financial Management DB1
In order to realize success, corporations, organizations, institutions and businesses must know what is happening around them and what is likely to happen in future. They should them proceed to position themselves to take advantage of future changes and as well as handle challenges. The process of this positioning is known as strategic planning. In this process the organization determine where it is, where it wants to go and how to get there. A strategic plan is a product of a strategic planning (Haines & McKinlay, 2007).
In this regard the function of a strategic plan is to provide a road map for achieving the long-term objectives of the organization. Is stipulates the process and the resources that will be used to achieve the objectives. The objectives of a strategic plan are the deliverable that the plan hopes to deliver within a specific time. The scope of such a plan is unlimited. It takes into account all the facets of the organization to ensure that objectives are realized. The scope may cover the objectives; the process of achieving the objectives such as sales forecasts; the resources required like financial forecasts; and the proper organization for optimal results (Grünig & Gaggl, 2011).
On the other hand, operating plans are short-term but very detailed plans formulated to achieve various objectives within the scope of the strategic plan. Operational plans are tactical and thus serve to organization the tactical components of the strategic plan.
Financial planning process is also important and involves six critical steps: determination of the current financial situation; developing financial goals; identification of alternative courses of action; evaluation of alternatives; creation and implementation of a financial action plan; and reevaluating and revising the plan.
Sales forecasts are also a critical component of a strategic plan. Sales forecasts are a product of looking ahead at the market and determining how a product will perform. Sales forecasts can inform various process and decisions such as promotional mix, required employment levels, and the required production capacity.
General forecasting involves looking ahead at various aspect of the organization to determine future opportunities, challenges, and threats such as changes in market trends, technological developments and completion. Forecasting determines financial needs, employment needs and organizational need. It serves to create a clear picture of where an organization needs be and how the path to the realization of its objectives looks like (Grünig & Gaggl, 2011).
Other factors external to the business can affect how a business exercises the above practices. This can clearly be seen on the way businesses responded to the September 11 terrorism attacks. Planning for a rainy day became part of long term strategic planning. Business forecasts have become more concerned of the unpredictable just as much as they are concerned with the predictable. Therefore, when making finical plans and strategic plans manager take into account social political dynamics that can negatively affect a business.
References
Grünig, R., & Gaggl, R. (2011). Process-based Strategic Planning. Berlin Heidelberg Springer.
Haines, S. G. & McKinlay, J. (2007). Reinventing Strategic Planning: The Systems Thinking Approach. San Diego, Calif.: Systems Thinking Press.
