Financial planning for the new year is crucial for a business because it relates to established financial goals as well as how resources will be used to achieve those goals.
Furthermore, financial planning is a time-consuming and labor-intensive task, requiring the involvement of multiple departments within the company.
1. Identify the economic context and business orientation.
Financial planning is a part of financial management. This activity requires research and investment before implementation. Managers should not overlook any information related to financial matters. Prepare and research every aspect of the market to avoid being caught off guard by changes and to make sound decisions. Reposition the brand, adjust the business model to suit the situation, and redefine future work organization methods. Financial and business planning also helps businesses demonstrate their ability to continue operating in the face of adverse factors such as the impact of the COVID-19 pandemic.
2. Identifying the company's financial needs
A wise manager knows how to prioritize important goals and decide on appropriate steps. Therefore, it is necessary to identify financial needs by answering questions such as: What are the company's investment goals? How much money needs to be invested? What type of investment will be made? Will it be long-term or short-term? Which departments need restructuring? What is the potential for benefits from restructuring? What is the scale of business expansion this year? What financial resources are needed to implement the expansion? Once specific financial needs have been identified, the manager can determine the next steps.
3. Gather financial data
After clearly identifying financial needs, the next step is to create a financial plan to better understand the intended cash flow and legal liabilities of the business. In this step, managers may need the assistance of a financial planning expert, who will help gather necessary documents regarding assets, liabilities, tax deductions, income and expense statements, employees, pension funds, insurance policies, brokerages, bank statements, etc.
In addition, a financial plan should clearly identify potential future risks and have resources set aside to address them.
4. Develop a financial plan.
The development of a financial plan must begin with the manager formulating implementation ideas for the issues considered in the previous step. This development phase includes: explaining the advantages and disadvantages of the plan, understanding tax laws and the financial system, considering occupational health and safety issues, assessing resilience to risks and cybersecurity risks, building a secure digital environment, preventing fraud and risks, and considering the application of technology in management and business operations.
5. Implement the financial plan.
Implementing the plan is a crucial step in the development process. It may take managers approximately 4-6 months to implement the planned strategy. During this phase, complex details related to taxes, payroll insurance, etc., require maximum attention. If possible, managers should seek advice from the legal department or external lawyers to make the most appropriate decisions. It is highly likely that, at the final stage of implementation, the financial plan will receive numerous collaboration offers if it is meticulously and professionally developed with many excellent ideas.
Develop technological platforms to support management, and urgently digitize to help improve decision-making and the ability to respond immediately to unforeseen events. Each level of management must have its own data system for decision-making.
6. Monitoring the financial plan
During implementation, business managers also need to monitor and supervise each step of the process. Portfolio reviews, insurance updates, investment selections, taxes, and reports on market conditions, business trends, market sentiment, etc., are documents that need to be carefully monitored to predict and avoid potential risks. Continuously updating cash flow fluctuations, forecasting short-term and long-term cash flow, and making timely adjustments if cash flow does not meet the business's needs are also crucial.
In addition, managers need to maximize their abilities to explore, observe, and quickly grasp market changes, proactively adapting to those changes accordingly. They should also update the restructuring progress to maintain relevance and, through this, seize significant M&A opportunities.