Significance of business financial planning
The success or failure of production and distribution function of business depends upon the financial decisions as right decision ensures smooth flow of finance and smooth operation of production and distribution. It provides a detailed plan of action for reducing uncertainly and for the proper direction of individual and group efforts. Financial planning attempts to achieve a balance between the inflow and outflow of funds. Adequate liquidity is ensured by financial planning. Financial planning acts as basis for checking the financial activities by comparing the actual revenue with estimated revenue and actual coat with estimated cost.
Financial is the life blood of business. So financial planning is an integral part of the corporate planning of business. All business plans depend upon the soundness of financial planning. By anticipating the financial requirements financial planning helps to avoid shock or surprise which otherwise firm have face in uncertain situations. Financial planning helps in deciding debt/equity ratio and by deciding where to invest this fund. It creates a link between both the decisions. It helps in coordinating various business functions such as production, sales function. Financial planning relates present financial requirement with future requirement by anticipating the sales and growth plans of the company.