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A Guide to Corporate Financial Planning

A Guide to Corporate Financial Planning

Individuals must keep track of their finances through budgeting, analyses of their spending habits, and a careful tracking of where their money is going and why. If an individual does not track these things, then that individual can easily wind up falling into financial ruin. The same can be said about any business, from large, multi-national corporations down to mom and pop stores down the street. Whether large or small, a careful understanding of the financial flow is crucial to remain afloat and function properly. Businesses can then improve their situation through looking ahead and planning exactly how their finances will flow. This is done through corporate financial planning.

Corporate financial planning, as the name suggests, is a process in which those who run a business will sit down and decide what exactly their financial goals are. What do they intend to accomplish? What do they hope to see in the future? Once they have determined their financial goals, then they decide how, specifically, they will be able to accomplish those goals. What changes will need to take place? How will they implement those changes? How long will it take to meet their goals?

Economic circumstances are constantly changing, whether it is the economy of the business itself, the economy of the local community, city, state, or nation. Each of these progressively larger stages send down ripple effects to all of the others, so it is crucial for the business leaders who are involved in corporate financial planning to determine exactly what the economic status of each level is and how each will specifically affect their business. Once they have determined these factors, they can then decide which investments and actions would be best for the business and most appropriate in order to meet the goals that have already been determined.

The business leaders who are taking part in the corporate financial planning will likely want to make some long term goals. Long term goals look forward to the far future, seeking to establish guidelines that will direct the business over many years. A small business may have a long term goal of becoming a franchise. A larger business may have a long term goal of going international and planting new business centers in other countries. These long term goals can be harder to stick to as the economic statuses at each level gradually shift and flow in response to events, whether local or global.

As such, it is easier and more productive in corporate financial planning to focus on short term goals. These are easier to keep because it is easier to predict how the economic situations will change (or not) over the short term. It is also easier to make adjustments to short term goals in order to keep them viable and useful. People can adjust these goals as needed to follow market trends or compensate for unexpected losses.

Just as individuals need a solid idea of their finances and goals for their financial futures, businesses must keep track of their money flow and have a plan ahead of time of what they want to see in their financial futures. So it is important for businesses, regardless of their size, to engage in corporate financial planning.

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