Business-Finance

1. Financial Planning
Process
Lesson 3.1
1
Business Finance
Accountancy, Business, and Management

2. When you receive
money, what is the first
thing that you do? Do
you plan how to spend
it?
2

3. Money has different
uses for different
people. For some, it is
meant to be spent. For
others, it has to be
grown.
3

4. If you want to use
money to reach your
financial goals, a
money management
plan is necessary.
4

5. Businesses create long-
and short-term plans to
achieve their financial
objectives. This process
is called financial
planning.
5

6. Quick Look
6
The concept of money is already embedded in our society. It is a scarce
resource; thus, the need for its circulation within the economy. With money
circulating in the system, businesses thrive and stay afloat. Without it, firms
would not be able to produce products and services. At this time, many
consider money as a necessity for their survival. Hence, one must give
focus on managing funds to uplift his or her standard of living.
Money Management

7. Quick Look
7
Money management refers to the process of keeping track of one’s funds
using different tools like budgets and financial plans. Simply put, it is a key
to determine the activities that concern fund allocation like spending,
saving, investing, and even paying off debts. Just imagine how you create a
budget to be able to fit up the money for the time being and to settle your
debts as soon as possible. With the use of financial tools, one can identify
strategies to achieve one’s financial goals.
Money Management

8. Quick Look
8
Money management is not only applied in personal finance but in
corporate finance as well. Companies prepare business plans, budgets, and
forecasted financial statements to decide on the different tactics and
strategies they must implement to obtain greater profit and maximize their
wealth. Firms prepare these tools regularly to find and maintain their
strong points and improve their weak areas.
Money Management

9. Quick Look
1. Why is money management important to you as a student?
2. How relevant is financial planning to organizations and businesses?
3. Is financial planning about controlling one’s finances? Explain your
answer.
9
Questions to Ponder

10. Learning Competency
Identify the steps in the financial planning process
(ABM_BF12-IIIc-d-10).
10

11. Learning Objectives
11
At the end of this lesson, you should be able to do the following:
● Discuss the financial planning process.
● Determine the different steps of the financial planning process.
● Analyze the importance of corporate financial planning in
simple business situations.

12. 12
How essential is financial planning in
attaining business goals?

13. Financial Planning Process
13
Formulate
objectives
Identify the
current
situation
Decide on tasks
to achieve
objectives
Determine
available
resources
1 2 3 4
Planning generally involves the following steps:

14. Financial Planning Process
14
Financial ratios and analysis
● help identify the current financial health, performance, and
position
● used to compare and forecast performance
● essential in financial planning

15. preparation of budget and
forecasted financial reports
to decide the most effective
ways to maximize wealth,
given all the internal and
external factors in the
business environment
Corporate Financial
Planning
15

16. Financial planning is a step-by-step process that involves tasks and
techniques, and how these will be implemented to attain the financial
goals one has set. For individuals, this process helps them to meet
their financial goals at every stage of their lives.
Creating budget plans helps individuals to ease the challenging task
of personal financial planning. This part will be tackled in the
succeeding discussion.
Financial Planning Process
16

17. ● Guides, coordinates, and
controls a firm’s financial
actions and decisions
● To attain business goals and
objectives
Financial Planning
17

18. Financial Planning
18

19. Closer Look
Budget turns goals into specific measurable targets and anticipates
problems. For instance, if the goal of a company is to increase its
profits over a period of two years, the budget outlines the specific
amount expected from sources, the intended allocation, and the
desired surplus.
Importance of Budget
19

20. Check Your Progress
Compare and contrast cash planning and profit planning.
20
1
Cash planning and profit planning are both important processes in
financial planning. Cash planning looks into the history of cash
flow to analyze the cash requirements based on the business plan.
Its main output is a cash budget. Profit planning presents the
projected future income and financial position of the company,
also based on the business plan. Its output are projected income
statements and balance sheets.

21. 21
Long-term
(Strategic)
Short-term
(Operational)
Financial
Planning
Financial Planning Process

22. Financial Planning Process
● is a comprehensive
document that includes
the firm’s financial
objectives, available
resources, courses of
action to attain those
objectives, and the
financial tools to support
the strategies and
decisions.
Financial Plan
22

23. Financial Planning Process
● outlines the financial
actions and the expected
effects over two to ten
years
● reflects the planned
outlay of assets, sources
of financing, and product
development, among
others.
Long-term (Strategic)
23
Financial Plan

24. Tools Used in Financial Planning
● implement the objectives
of the strategic plan
● specifies the attainable
financial actions and
effects over a period of
one to two years
Short-term
(Operational)
24
Financial Plan

25. Control
● monitoring and
evaluation to perform
corrective actions when
necessary
25
Financial Planning Process

26. Check Your Progress
What is the relationship between long-term and short-term
financial plans?
26
3
The long-term financial plan outlines the financial position and
performance that the firm wants to achieve over a certain period,
usually between two to ten years. The short-term financial plan
implements the objectives of the strategic plan in shorter periods,
with the objective of contributing to the achievement of the long-
term plan.

27. 27
Financial Planning Process
Steps in Creating a
Financial Plan
a continuous process

28. Setting Goals
● long-term, medium-term,
and short-term
● guides other phases of the
process
● involves consideration of
the current financial
situation
28
Steps in Financial Planning

29. Steps in Financial Planning
Assessing Resources
● checks on income, savings,
and other financial resources
● includes manpower,
materials, machinery, and
methods
29

30. Planning the
Course of Action
● working out a plan to
achieve the goals
● identifying persons in
charge and flow of
responsibilities
30
Steps in Financial Planning

31. Steps in Financial Planning
Testing for Stress
● testing how the plan can
stand various factors (risks,
inflation, etc.)
● preparation of alternative
plans in case things do not
happen as expected
31

32. Executing the Plan
execution and constant
monitoring
32
Steps in Financial Planning

33. Steps in Financial Planning
Reviewing and
Evaluating
● assessing the effectiveness of
the plan and its
implementation
● adjusting or amending if
necessary
33

34. 34
Financial Planning Process
Steps in Creating a
Financial Plan
● ensures that target
deliverables are
attained
● possible alternatives
are ready

35. Check Your Progress
Why is it necessary for financial plans to be evaluated?
35
4
Financial plans serve as guides on how to improve the
financial performance of the business. Thus, it must be
evaluated to determine if the strategies included in the
plans contributed to the success of the organization
from a financial perspective.

36. Case Study
Financial planning and analysis (FP&A) uses tools such as
business plans, budget and cost projections, financial
statements, and break-even analysis. Traditionally, finance teams
gather data from tons of spreadsheets from different
departments just to perform their task.
One Platform for All Financial Planning & Analysis Data
36
Paul Sawers, “Collaborative Financial Planning and Analysis Platform Abacum Raises $25M,” VentureBeat (November
30, 2021),
https://venturebeat.com/2021/11/30/collaborative-financial-planning-and-analysis-platform-abacum-raises-25m/, last
accessed on December 1, 2021.

37. Case Study
In April 2020, Abacum started with the aim of simplifying the
FP&A process of companies. According to its founder and CEO,
the ultimate goal is to provide finance teams of companies with
a smarter and more intuitive solution in handling financial
planning and processes that can adapt and grow with the
company.
One Platform for All Financial Planning & Analysis Data
37
Paul Sawers, “Collaborative Financial Planning and Analysis Platform Abacum Raises $25M,” VentureBeat (November
30, 2021),
https://venturebeat.com/2021/11/30/collaborative-financial-planning-and-analysis-platform-abacum-raises-25m/, last
accessed on December 1, 2021.

38. Case Study
If companies will use it, they will be able to synchronize and
manage their financial and other data from a central database to
generate insights, produce charts and graphs, and collaborate
with other systems used in the financial planning process.
One Platform for All Financial Planning & Analysis Data
38
Paul Sawers, “Collaborative Financial Planning and Analysis Platform Abacum Raises $25M,” VentureBeat (November
30, 2021),
https://venturebeat.com/2021/11/30/collaborative-financial-planning-and-analysis-platform-abacum-raises-25m/, last
accessed on December 1, 2021.

39. Case Study
Abacum is still new to the industry and trying to establish
networks with other companies. However, according to the latest
report, because its vision is to be the leading solution provider to
more companies, it was able to raise funds of $25 million led by
one of the largest European ventures.
One Platform for All Financial Planning & Analysis Data
39
Paul Sawers, “Collaborative Financial Planning and Analysis Platform Abacum Raises $25M,” VentureBeat (November
30, 2021),
https://venturebeat.com/2021/11/30/collaborative-financial-planning-and-analysis-platform-abacum-raises-25m/, last
accessed on December 1, 2021.

40. A business plan is a comprehensive written document
that summarizes the history of the company, its vision,
mission, marketing strategies, operation or production
process, organizational structure, socio-economic
impacts, and financial projections. This financial tool
guides the management team in planning the best
course of action, such as in financing the firm’s
expenses. It helps the key stakeholders to determine
the possibility of returns on investments.
BUSINESS PLAN

41. Budget and Cost Projections
Budget is a financial tool that outlines the information on a firm’s
income generation, cash flow, and allocation of funds reflecting future
conditions (Indeed Editorial Team 2021). On the other hand, cost
projection is a tool that shows information on past and present
financial investments focusing on the development, implementation,
and maintenance of project operations (McConnell 2010). Both of
these tools are useful in forecasting wherein current and previous
financial information are analyzed to estimate whether the company
is headed towards the desired future results.

42. Budget and Cost Projections
Budget is a financial tool that outlines the information on a firm’s
income generation, cash flow, and allocation of funds reflecting future
conditions (Indeed Editorial Team 2021). On the other hand, cost
projection is a tool that shows information on past and present
financial investments focusing on the development, implementation,
and maintenance of project operations (McConnell 2010). Both of
these tools are useful in forecasting wherein current and previous
financial information are analyzed to estimate whether the company
is headed towards the desired future results.

43. Break-even analysis
Break-even analysis is a financial tool that shows which conditions
would make total revenue enough to cover the total expenses of a
firm. New and existing businesses conduct periodical break-even
analysis to determine the break-even point, and find opportunities to
increase income while decreasing total costs.

44. Financial statements
Financial statements. Financial statements present the effects of
financial transactions and other economic events to the business’s
financial performance and position in a given period. Businesses
periodically submit financial reports that comply with financial
reporting standards. It is also used to compare the performance of
entities in the same industry. Financial statements must be accurate,
objective, and transparent so that users can make sound decisions.

45. Keep in Mind
● Financial planning is key to reaching personal and business goals. It is
especially vital to business operations as it guides, coordinates, and
controls the firm’s financial actions and decisions.
45

46. Keep in Mind
● Financial planning involves
cash planning and profit
planning.
46

47. Keep in Mind
● Financial planning requires input from several financial tools such as
business plans, budget and cost projections, break-even analysis, and
financial statements. The information contained in these tools are
necessary in analyzing the current situation and projecting and
forecasting future performance.
47

48. Keep in Mind
● Companies create long-term and short-term financial plans. The
continuous process involves setting up goals, assessing resources,
planning the course of action, testing for stress, executing the plan,
and reviewing and evaluating the performance vis-a-vis the plan.
48

49. Keep in Mind
● The financial planning process helps companies turn goals into targets
and control business activities to attain them. In times of funds
insufficiency, financial planning shows the possible alternatives that
businesses might want to take.
49

50. Try This
Raise your hand to identify what is being described.
1. It refers to the business’s process of creating targeted
quantifiable results while considering the different situations and
risks they may be exposed to.
50
Answer area

51. Try This
Raise your hand to identify what is being described.
2. It is the document that results from the cash planning process.
51
Answer area

52. Try This
Raise your hand to identify what is being described.
3. These are the documents that result from the profit planning
process.
52
Answer area

53. Try This
Raise your hand to identify what is being described.
4. These are the inputs required in financial planning that allows
the management to use quantifiable financial data throughout
the process.
53
Answer area

54. Try This
Raise your hand to identify what is being described.
5. It refers to the management function of monitoring and
evaluating the implementation of a plan to perform corrective
actions when necessary.
54
Answer area

55. Practice Your Skills
Consider this business scenario and answer the following questions.
XYZ Co. is a newly established business in Quezon City. Its
main operation is focused on providing internet service to its
residents and nearby cities. After months of operating, the
company experienced three consecutive net losses due to
increased variable costs.
55

56. Practice Your Skills
Based on the business scenario, answer the following question.
1. Do you think that XYZ Co. needs to integrate financial
planning into its operations? Explain how your answer
would benefit the company.
56
Answer area

57. Practice Your Skills
Based on the business scenario, answer the following question.
2. What is the best financial tool to be used by the firm in
case it chooses to incorporate financial planning in its
operations? Why do you think so?
57
Answer area

58. Challenge Yourself
Answer the following questions briefly and concisely.
1. As a senior high school student, how will you apply simple
personal financial planning in your everyday life?
58
Answer area

59. Challenge Yourself
Answer the following questions briefly and concisely.
2. We are already in the technological age. Are there any
technological variables that could affect the process of
corporate financial planning? Enumerate if there are.
59
Answer area

60. Photo Credit
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Slide 1: Man Typing, by Campaign Creators is free to use under under the Unsplash License via Unsplash.

61. Bibliography
Chron Contributor. “Small Business - Chron.com. “Key Tools for Planning Finances.” Last modified July 19, 2021.
https://smallbusiness.chron.com/key-tools-planning-finances-25423.html.
Corporate Finance Institute. “FP&A.” Last modified January 24, 2022.
https://corporatefinanceinstitute.com/resources/careers/jobs/financial-planning-and-analysis-fpa/.
FPA of Minnesota. “What Is Financial Planning?” Last accessed March 8, 2022.
https://fpamn.org/consumers/what-is-financial-planning/.
FPSB. “Financial Planning Process.” Last accessed March 8, 2022.
https://www.fpsb.org/about-financial-planning/financial-planning-process/.
Gitman, Lawrence, and Chad Zutter. Principles of Managerial Finance. 14th edition. Harlow: Pearson Education
Limited, 2015.
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62. Bibliography
Lowe, Jonquit. Be Your Own Financial Adviser. Harlow: Pearson Education Limited, 2010.
Indeed Editorial Team. “What is a budget?” Last modified February 23, 2021.
https://www.indeed.com/career-advice/career-development/what's-a-budget
Martinelli, Mark. “The Importance of Having Strong Financial Planning and Analysis.” WIPFLI. Last modified May 2,
2016.
https://www.wipfli.com/insights/articles/aa-the-importance-of-having-strong-financial-planning-and-analysis.
McConnell, Eric. “Cost Projection Statement and Analysis.” Last modified November 17, 2010.
https://mymanagementguide.com/cost-projection-statement-and-analysis/.
Norman, Leyla. “What Are the Four Basic Functions That Make Up the Management Process?” Small Business -
Chron.com. Last modified January 18, 2019.
https://smallbusiness.chron.com/four-basic-functions-make-up-management-process-23852.html.
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