What is the Importance of Efficient Financial Management?

Financial management efficiency is closely linked to forecasting and programming. Expert sources state that most of the business failure (30-40%) is attributable to forecasting and programming mistakes.

Forecasts provide an opportunity for management authorities to consider different variants of development and assess the likelihood of their occurrence. To increase the credibility of the results, especially if a jump in development is anticipated- economic methods are complemented by expert judgment. A prognostic scenario method can also be used to determine the logical order of events so that the future state of the enterprise can be developed step by step. Forecasting and programming imply the proper selection of methods according to the purpose of the forecast, the extent, and characteristics of the information disposal. 

The prognostic scenario method can also be used. Scenario writing is a method by which a logical sequence of events is determined with the aim of demonstrating step by step the development of the future state of the enterprise.

Financial planning is a form of presentation of various types of plans in financial indicators. These plans relate to procurement, production sales, and development. These functions should increase with each other, with a temporal manifestation of their relationship. Financial planning is the concretization of the financial policy along with financial plans that put the objective of fiscal policy in value expression in time and space.

Planning of sources of financial resources and their flows and own financial planning are two stages of financial planning.

According to the planning period, there are:

  • long-term planning that relates to a period over 5 years
  • medium-term planning to 5 years
  • short-term planning for up to 1 year

Financial planning includes a profit and loss plan, development, and risks are planned, balance sheet plan where the ability to express solvency and financing is expressed in shorter and longer periods of the planning period, cash flow plan, the long-term investment plan expresses the scope, structure, duration of the investment and the structure of the funding source. Visit Lavi CPA to get all the information you need around finances.

Financial planning is tasked with developing and presenting to the managing authorities a comprehensive and coordinated plan of activities of the enterprise and its needs for business resources and sources of financing for a specified period, which is expressed in monetary form.

The financial plan refers to the enterprise as a whole, not its organizational parts. The plans of individual organizational units must be aligned and oriented toward the same goal.