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What Is a Financial Plan for a Business? - Definition & Example

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  • 0:00 What Is Financial Planning?
  • 0:25 Benefits Of Developing A Plan
  • 0:50 Example
  • 2:50 Lesson Summary
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Instructor: Paul Mckinney

Paul has been in higher education for 17 years. He has a master's degree and is earning his PhD in Community College Leadership.

A financial plan for a business can help managers determine if they can achieve the organization's goals. The financial plan is one of the first things created to help managers make decisions that are in the best interest of the organization.

What Is Financial Planning

Financial planning for a business is the task of determining how the organization will afford to achieve its strategic goals. Usually, an organization creates a financial plan immediately after the vision and objectives have been determined. The financial plan describes each of the activities, resources, equipment, and materials that are needed to achieve an organization's objectives as well as the timeframe.

Benefits of a Developing a Financial Plan

Developing a financial plan is critical to the success of any organization. It validates the business plan, by confirming that the objectives set are achievable from a financial point of view. It also helps the CEO to set financial targets for the organization and reward staff for meeting objectives within the budget. The following diagram shows how the financial plan fits into the overall business plan of an organization.

Example

A financial plan can be divided into several parts. Below is an outlined example of a financial plan that can be used by an existing organization:

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