Planning finance involves what kind of finance should be used, where to obtain and when should it be available. The following tabulate some advantages or benefits derive from financial planning:-
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The benefits/advantages of planning finance or financial planning are as follows
- The future needs for finance are transparent and understood, both in respect of the quantum and also the timing the finance(s) are required
- The enterprise is given time to arrange such finance reasonably in advance of needs so as not to create panics or getting the finance at the right pricing
- Knowing future financial requirements well ahead of needs enables the enterprise to select the most appropriate moment for arranging such finance
- A well thought-out financial plan from the enterprise gives assurance to potential investors/shareholders/bankers that:-
- (a) The enterprise is being properly manage with managers acting to direct future events and not merely reacting to past events &
- (b) The promises of management are properly based assessments within a realistic framework and not just being pure optimistic
- (c) Having a financial plan enable a definite form of financial control can be devised. Comparing actual figure with planned will immediately indicate when factors affecting financial needs begin to move in an unplanned direction eg stocks build up excessively or debtors payments being delayed.
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