Category: Planning

Planning | Management!

  • Debt Management Plan Pros and Cons: How to be Know

    Debt Management Plan Pros and Cons: How to be Know

    Exploring the Pros and Cons of a Debt Management Plan. A Debt Management Plan (DMP) is a financial arrangement designed to help individuals repay their outstanding debts. It is typically a mutually agreed-upon plan between the debtor and their creditors, facilitated by a reputable credit counseling agency.

    In a DMP, the credit counseling agency negotiates with creditors to reduce or eliminate late fees, lower interest rates, and establish an affordable repayment plan. Rather than making multiple payments to different creditors, the debtor makes a single monthly payment to the credit counseling agency, which then distributes the funds to the creditors according to the agreed-upon plan.

    Debt Management Plans are suitable for individuals who are struggling to meet their debt obligations but have a steady income. They can provide a structured approach to debt repayment, helping to simplify the process and make it more manageable. However, it’s important to carefully consider the implications of entering into a DMP and to seek professional advice before making any decisions.

    Debt Management Plan Pros and Cons: A Comprehensive Guide

    Dealing with outstanding debts can be overwhelming, but a Debt Management Plan (DMP) is one option that can help you regain control of your finances. What are the Benefits of a Debt Management Plan? However, it’s important to weigh the pros and cons before deciding if this is the right path for you.

    A Comprehensive Guide to Debt Management Plan Pros and Cons Image
    Photo from ilearnlot.com

    Here are the key pros and cons to consider when exploring a DMP:

    Pros of a Debt Management Plan

    A Debt Management Plan (DMP) offers several advantages for individuals struggling with debt. Here are some key pros to consider:

    Structured Repayment: 

    A DMP provides a structured approach to debt repayment. It helps you organize your finances by consolidating multiple debts into a single monthly payment, making it easier to manage and keep track of your obligations.

    Lower Interest Rates: 

    In many cases, credit counseling agencies can negotiate with creditors to lower the interest rates on your debts. This can result in significant savings over time, allowing you to pay off your debts more efficiently.

    Elimination of Late Fees: 

    Through negotiations, a DMP can also lead to the elimination or reduction of late fees and penalties associated with your debts. This can help you save money and prevent further financial strain.

    One Payment: 

    With a DMP, you only need to make one monthly payment to the credit counseling agency, which then distributes the funds to your creditors. Also, This simplifies the payment process and reduces the chance of missing or forgetting payments.

    Professional Guidance: 

    Working with a reputable credit counseling agency provides access to professional guidance and expertise. They can offer personalized advice, budgeting assistance, and financial education to help you become more financially literate and make informed decisions.

    Potential for Debt Reduction: 

    As part of the negotiation process, credit counseling agencies may be able to reduce the total amount of debt you owe. While not guaranteed, this reduction can provide relief and shorten the time it takes to become debt-free.

    It’s important to note that the effectiveness of a DMP can vary depending on individual circumstances. Seeking professional advice from a reputable credit counseling agency is crucial to ensure that a DMP is the right solution for your specific financial situation.

    Cons of a Debt Management Plan

    While a Debt Management Plan (DMP) can be a helpful tool for managing and repayment of debts, it’s important to consider the potential drawbacks as well. Here are some cons to be aware of:

    Extended Repayment Period: 

    With a DMP, the repayment period is typically extended as part of the negotiation process. While this can result in reduced monthly payments, it also means it may take longer to completely pay off your debts. You need to evaluate whether the longer duration aligns with your financial goals.

    Impact on Credit Score: 

    Enrolling in a DMP can have an impact on your credit score. While making regular payments through the plan demonstrates responsible financial behavior, some creditors may report that you are in a debt management program, which could be seen negatively by future lenders. It’s important to be aware of this potential consequence.

    Limited Credit Access: 

    While on a DMP, you may have limitations on your ability to access new lines of credit. Some creditors may require you to close your existing accounts, which could affect your credit utilization ratio and credit history. This restriction may pose challenges if you need credit for emergencies or other purposes during the program.

    Possible Inclusion of All Debts: 

    While most unsecured debts can be included in a DMP, some debts, such as secured loans like mortgages or car loans, are usually not eligible. This means you still need to manage those debts separately, which can complicate your overall financial situation.

    Monthly Payment Obligation: 

    It’s crucial to make the monthly payments on time and in full to maintain the benefits of a DMP. Missing a payment can result in the termination of the program and reinstatement of original interest rates and fees. You need to ensure that you can consistently meet the payment obligations.

    Potential Costs: 

    While nonprofit credit counseling agencies typically offer DMP services for free or at a low cost, depending on the agency. There may be setup fees, monthly maintenance fees, or other charges associated with the program. Also, It’s important to understand the fees involved and ensure they are reasonable and within your budget.

    Recognizing, and considering the potential drawbacks is essential to make an informed decision. It’s advisable to consult with a reputable credit counseling agency to discuss your specific circumstances and determine if a DMP is the right solution for you.

    Remember, every individual’s financial situation is unique, and what works for one person may not work for another. It’s crucial to carefully evaluate your circumstances, seek professional advice from a reputable credit counseling agency, and consider alternative options if necessary. A DMP can be a helpful tool, but it’s essential to understand its implications before making a decision.

    Why is a Debt Management Plan Necessary?

    A Debt Management Plan (DMP) is necessary for individuals who are struggling to meet their debt obligations and need assistance in managing and repaying their debts. There are several reasons why a DMP may be necessary:

    1. Financial Difficulty: A DMP is designed to help individuals who are facing financial difficulties. It provides a structured approach to debt repayment, making it easier to manage and keep track of multiple debts.
    2. High-Interest Rates: If you have high-interest rates on your debts, a DMP can help lower those rates through negotiations with creditors. This can save you money and make it more feasible to pay off your debts.
    3. Late Fees and Penalties: A DMP can also lead to the elimination or reduction of late fees and penalties associated with your debts. This can help alleviate some financial strain and make your debt repayment more manageable.
    4. Simplified Repayment: With a DMP, you make a single monthly payment to a credit counseling agency. Which then distributes the funds to your creditors according to the agreed-upon plan. This simplifies the repayment process and reduces the risk of missing or forgetting payments.
    5. Professional Guidance: Working with a reputable credit counseling agency provides access to professional guidance and expertise. They can offer personalized advice, budgeting assistance, and financial education, helping you become more financially literate and make informed decisions.
    6. Potential Debt Reduction: In some cases, credit counseling agencies may be able to negotiate with creditors to reduce the total amount of debt you owe. While not guaranteed, this reduction can provide relief and shorten the time it takes to become debt-free.

    It’s important to remember that a DMP may not be suitable for everyone. It’s crucial to assess your specific financial situation and seek professional advice before entering into a DMP.

    Bottom line

    A Debt Management Plan (DMP) is a financial arrangement that helps individuals repay their debts. It involves negotiating with creditors to reduce fees and interest rates and establishing a manageable repayment plan. The pros of a DMP include structured repayment, lower interest rates, elimination of late fees, and professional guidance.

    However, there are cons to consider such as an extended repayment period, potential impact on credit score, limited credit access, and possible inclusion of all debts. It’s important to make monthly payments on time and understand potential costs. Ultimately, seeking professional advice is crucial to determine if a DMP is the right solution for one’s financial situation.

  • Management explains the Categories and levels of Planning

    Management explains the Categories and levels of Planning

    Meaning of Planning; It is the process of thinking about the activities required to achieve the desired goal. It is the first and foremost activity to achieve the desired results. What are the categories and levels of Planning? Categories and Levels of Planning; A class or division of people or things regarded as having particular shared characteristics. And, a level is a point on a scale, and a position on a scale of amount, quantity, extent, or quality.

    Here are explain; What are the categories and levels of Planning? Know and Understand each of them!

    The following Categories and Levels are below;

    What are the categories of planning?

    Meaning of categories; Categories defines as different-different departmental divided into different levels in the base of their profession. A class or division of people or things regarded as having particular shared characteristics. Any of several fundamental and distinct classes to which entities or concepts belong Taxpayers fall into one of several categories.

    Planning can classify on different bases which are discussed below:

    Strategic and Functional Planning.

    In strategic or corporate planning, the top management determines the general objectives of the enterprise and the steps necessary to accomplish them in the light of resources currently available and likely to be available in the future. Functional planning, on the other hand, is planning that covers functional areas like production, marketing, finance, and purchasing.

    Long-range and short-range planning.

    Long-range planning sets the long-term goals of the enterprise and then proceeds to formulate specific plans for attaining these goals. It involves an attempt to anticipate, analyze, and make decisions about basic problems and issues which have significance reaching well beyond the present operating horizon of the enterprise.

    Short-range planning, on the other hand, is concerned with the determination of short-term activities to accomplish long-term objectives. Short-range planning relates to a relatively short period and has to be consistent with the long-range plans. Operational plans are generally related to short periods.

    Adhoc and Standing Planning.

    Adhoc planning committees may constitute for certain specific matters, as, for project planning. But standing plans are designing to use over and over again. They include organizational structure, standard procedures, standard methods, etc.

    Administrative and Operational Planning.

    Administrative planning is finishing by the middle-level management which provides the foundation for operative plans. Operative planning, on the other hand, is finishing by the lower-level managers to put the administrative plans into action.

    Physical Planning.

    It is concerned with the physical location and arrangement of buildings and equipment.

    Formal and Informal Planning.

    Various types of planning discussed above are formal. They are carrying on systematically by the management. These specify in black and white the specific goals and the steps to achieve them.

    They also facilitate the installation of internal control systems. Informal planning, on the other hand, is mere thinking by some individuals which may become the basis of formal planning in the future.

    What are the levels of planning?

    Meaning of level; A horizontal plane or line concerning the distance above or below a given point. Second means, a level is a point on a scale, and a position on a scale of amount, quantity, extent, or quality.

    In management theory, it is usual to consider that there are three basic levels of planning, though in practice there may be more than three levels of management and to an extent, there will be some overlapping of planning operations.

    The three levels of planning are as under:

    Top Level of Planning.

    Also known as overall or strategic planning, top-level planning is done by the top management, i.e. board of directors or governing body.

    It encompasses the long-range objectives and policies of the organization and is a concern with corporate results rather than sectional objectives.

    Top-level planning is entirely long-range and is inextricably linked with long-term objectives. It might call the “what” of planning.

    Second Level of Planning.

    Also known as tactical planning, it is done by middle-level managers or department heads. It’s concerned with “how” of planning. They deal with the deployment of resources to the best advantage.

    It is concerned mainly, but not exclusively, with long-range planning, but its nature is such that the periods are usually shorter than those of strategic planning.

    This is because its attentions are usually devoting to the step by step attainment of the organization’s main objectives. It is, in fact, Oriente to functions and departments rather than to the organization as a whole.

    Third Level of Planning.

    Also known as operational or activity planning, it is the concern of department managers and supervisors. It is confining to putting into effect the tactical or departmental plans. It is usually for short-term and may revise quite often to be in tune with the tactical planning.

    What is the categories and levels of Planning
    What are the categories and levels of Planning? #Pixabay.

    Advanced levels of strategic planning:

    Upstair we have discussed – the categories and levels of Planning. And, now studying and take a look at the topic; levels of strategic planning are also useful.

    There are three levels of strategic planning: Corporate, business, and functional. The strategy may plan at each level, but the plans for every level of an organization should align to ensure maximum unity of effort. Without alignment, departments and functions will be working at cross-purposes, and the overall corporate strategy will be less effective.

    Here is how strategist views each of the three levels of strategic planning:

    Corporate level:

    Planning at this level should provide overall strategic direction for an organization, sometimes refers to as the “grand strategy.” This is a concise statement of the general direction which senior leadership intends to undertake to accomplish their stated mission or vision.

    The corporate-level strategy is usually deciding by the CEO and the Board of Directors although other senior leaders will often contribute to the strategy formulation. Strategic options at the corporate level will likely require a commitment of a significant portion of the firm’s resources over an extending period, and the results will have a significant impact on the future health of the organization.

    Strategic planning at this level will usually include a robust analysis and identification of several strategic options based on the assumed future operating environment. In a multi-business firm, careful consideration will give to the overall core competencies of the firm and where the boundaries lie between corporate and business level responsibilities.

    Business level:

    Each business within an organization will develop a strategy to support the overall business within its specific industry. The business-level strategy reflects the current position of the firm within its industry and identifies how the available resources can apply to improve the position of the firm about its competitors.

    There are a variety of ways that businesses will compete, but more often than not it is based on the USP (unique selling proposition) of the firm which distinguishes the company and its products from other competitors. If there are no differences between one firm’s products or services from other competitors, then the product or service becomes a commodity.

    Competition among firms that offer commodities is usually root in price competition, and low-cost providers usually take over. On the other hand, businesses that distinguish themselves can compete on their unique selling proposition.

    If they can successfully demonstrate why they are different and how that difference can provide a better level of service or quality product, then the business can command a higher margin for the premium service or product. This is the “value” adds by the firm, and the business strategy should focus on how the firm adds value.

    Functional level:

    The functional level describes the support functions of a business: Finance, Marketing, Manufacturing, and Human Resources are a few examples of the functional level. Strategies at this level should define to support the overall business and corporate-level strategies.

    If the functional level leaders can describe their activities and goals about the business or corporate levels. Then everyone in the organization will align and as such contribute to the overall goals and objectives for the organization.

    So for example, functional leaders for IT or HR must ask. If the strategies for their functions match and support the overall strategic direction of the businesses. They support or of the overall firm itself.

    The best strategic planners understand how important. It is for a firm to have alignment among the corporate, business, and functional levels of strategy. The overall corporate-level strategies will not be effective. If the supporting business and functional level strategies are inconsistent with the overall strategic intent of the senior leaders. Thus, it is not only important to pick the right strategy for the corporate level. But also equally important to make sure that the business and functional level strategies support the overall grand strategy for the organization.

  • Why Financial Planning is Essential for the Success of any Business Enterprise?

    Why Financial Planning is Essential for the Success of any Business Enterprise?

    10 Key Importance of Financial Planning is very helpful to get you Success in the Business Enterprise. Why Financial Planning is very helpful? Because Financial Planning helps in diminishing the vulnerabilities which can be a deterrent to the development of the organization. Guarantees providers of funds to effortlessly put resources into organizations which provokes financial planning. Financial Planning supports development and expansion programs that support the long-run sustenance of the organization. So, the question discussed is – Why Financial Planning is Essential for the Success of any Business Enterprise?

    The Concept of Financial Management is explaining the Importance of Financial Planning with Tops 10 Key.

    Financial planning the plan need for estimating the fund requirements of a business and determining the sources for the same. It essentially includes generating a financial blueprint for the company’s future activities. No matter how accurately you keep track of your income and expense, failing to plan your business’s finances can lead to unnecessary interest payments, lack of capital during critical periods, and eventual legal problems. Using a few basic budgeting, forecasting, and tracking techniques, you can maximize your profit potential. A financial advisor can help you understand how your current decisions will affect the options and choices available during your Business Enterprise to create perfect Financial Planning.

    Importance of Financial Planning:

    The following 10 Key Importance of Financial Planning here below are; Why Financial Planning is Essential for the Success of any Business Enterprise? Its need is felt because of the following reasons:

    It Facilitates the Collection of Optimum Funds:

    Financial planning estimates the precise requirement of funds which means avoiding wastage and over-capitalization situations.

    Helps to Face the Eventualities:

    It tries to forecast various business situations. On this basis, alternative financial plans prepare. By doing so, it helps to face the eventual situation in a better way.

    It Helps in Fixing the Most Appropriate Capital Structure:

    Funds can arrange from various sources and use for the long-term, medium-term, and short-term. Financial planning is necessary for tapping appropriate sources at an appropriate time as long-term funds generally contribute by shareholders and debenture holders, medium-term by financial institutions, and short-term by commercial banks.

    Helps in Investing Finance in Right Projects:

    The financial plan suggests how the funds are to allocate for various purposes by comparing various investment proposals.

    Helps in Operational Activities:

    The success or failure of the production and distribution function of a business depends upon the financial decisions as the right decision ensures a smooth flow of finance and smooth operation of production and distribution.

    There are several platforms that help businesses make the right financial decision and simplify operational activities. You can read more about such service providers and get a quote to help your business progress with expert guidance.

    The base for Financial Control:

    Financial control may construe as the analysis of a company’s actual results, approached from different perspectives at different times, compared to its short, medium, and long-term objectives and business plans. All financial activities keep under complete control with the help of financial planning. Under it, standards of financial performance are set.

    Actual performance compared with the standards so set. Deviations and their causes trace and corrective measures are taken. Financial planning acts as the basis for checking financial activities by comparing the actual revenue with estimated revenue and the actual cost with an estimated cost.

    Helps in Proper Utilization of Finance:

    Finance is the lifeblood of business. So financial planning is an integral part of the corporate planning of the business. All business plans depend upon the soundness of financial planning. In equipment and tool rental companies, utilization is the primary method by which asset performance measures and business success determine. In basic terms, it is a measure of the actual revenue earned by assets against the potential revenue they could have earned.

    Helps in Avoiding Business Shocks and Surprises:

    By anticipating the financial requirements financial planning helps to avoid shock or surprises which otherwise firms have to face in uncertain situations. The proper provision regarding shortage or surplus of funds is made by anticipating future receipts and payments. Hence, it helps in avoiding business shocks and surprises.

    Financial planning helps in deciding the debt/equity ratio and deciding where to invest this fund. It creates a link between both decisions. The separation of financing and investing decisions is one such important concept. It is important because we have to make a very important adjustment based on this principle. That adjustment is the fact that we do not subtract interest costs while calculating the cash flows that a project will generate.

    This is different from accounting where we stood used to subtract the interest costs to calculate our income. So here we must remember that we have to exclude interest costs from our calculation. It helps in deciding where to invest and from where the required funds will make available. Under it, the mix of share capital and debt capital make in such a manner that the cost of capital reduces to a minimum.

    Helps in Coordination:

    In the organization, there are many individuals, groups, and departments. They perform many different activities. Coordination means integrating these activities for achieving the objectives of the organization. Coordination is done to achieve the objectives of the organization, Coordination is a process.

    It helps in coordinating various business functions such as production, sales function, etc. The organization of the different elements of a complex body or activity enables them to work together effectively. It helps in coordinating various business activities, such as sales, purchase, production, finance, etc.

    Financial planning relates present financial requirements with the future requirement by anticipating the sales and growth plans of the company. Also, it makes effort to link the present with the future. Doing so helps to minimize the risk of future uncertainties.

    Helps in Avoiding Wastage of Finance:

    In the absence of financial planning, wastage of financial resources may take place. This arises due to the complex nature of business operations, such as excessively over-or underestimation of finance for a particular business operation. Such a type of wastage can be avoided through financial planning.

    Why Financial Planning is Essential for the Success of any Business Enterprise
    Why Financial Planning is Essential for the Success of any Business Enterprise? Image credit from #Pixabay.
  • Financial Planning: Steps, Elements, Advantages, Limitations

    Financial Planning: Steps, Elements, Advantages, Limitations

    Financial planning is an important part of financial management. It is the process of determining the objectives; policies, procedures, programmes, and budgets to deal with the financial activities of an enterprise. Financial planning reflects the needs of the business and is integrated with the overall business planning. Proper financial planning is necessary to enable the business enterprise to have the right amount of capital to continue its operations efficiently. So, what we discussing is – Financial Planning: Steps, Elements, Advantages, Limitations.

    The Concept of Financial Planning explains their key points into Steps, Elements, Advantages, and Limitations.

    Financial planning involves taking certain important decisions so that funds are continuously available to the company and are used efficiently. In this article we Discuss; Financial Planning: Steps of Financial Planning, Elements of Financial Planning, Advantages and Disadvantages of Financial Planning, Limitations of Financial Planning, and Process of Financial Planning.

    Steps in Financial Planning:

    Financial planning involves the following steps:

    These are:

    • Set-up Financial Objectives.
    • Financial Policies.
    • Procedures, and.
    • Flexibility.

    Now, explain each one;

    Set-up Financial Objectives:

    The financial objectives of a company should be clearly determined. Both short-term and long-term objectives should be carefully prepared. The main purpose of financial planning should be to utilize financial resources in the best possible manner. There should be an optimum utilization of funds. The concern should take advantage of the prevailing economic situation.

    Financial Policies:

    The financial policies of a concern deal with procurement, administration, and distribution of business funds in the best possible way. There should be clear-cut plans of raising required funds and their possible uses. The current and future needs for funds should be considered while formulating financial policies.

    Procedures:

    The procedures are formed to ensure consistency of actions. The procedures follow the formulation of policies. If a policy is to raise short-term funds from banks, then a procedure should be laid to approach the lenders and the persons authorized to initiate such actions.

    Flexibility:

    The financial planning should ensure proper flexibility in objective, policies, and procedures so as to adjust according to changing economic situations. The changing economic environment may offer new opportunities. The business should be able to make use of such situations for the benefit of the concern. A rigid financial planning will not let the business use new opportunities.

    Elements of Financial Planning:

    Financial planning involves the following steps or elements:

    These are:

    • Objectives.
    • Capital Requirements.
    • Kinds of Securities to be issued, and.
    • Policies.

    Now, explain each one;

    Objectives:

    For effective financial planning, it is essential to clearly lay down the financial objectives sought to be achieved. The financial objectives should be based on the overall objectives of the company. The objectives of financial management may be set up in the areas, namely, investment, financing, and dividend.

    Capital Requirements:

    Capital is required for various needs of the business. The separate assessment is to be made of the requirements of fixed and working capital. Fixed capital is needed for acquiring fixed assets such as land and building, plant and machinery, furniture, etc. It is blocked for a long time. Working capital is required for holding current assets like stock, bills receivable, etc. and cash for meeting day-to-day expenses in running the business.

    Kinds of Securities to be issued:

    A company can issue equity shares, preference shares, and debentures to raise long-term funds. The types and proportion of securities to be issued should be properly determined.

    Policies:

    Financial planning leads to the formulation of policies relating to borrowing and lending, cash control and other financial activities. Such policies will help in taking vital decisions for the administration of capital and achieving coordination in financial activities.

    Advantages and Disadvantages of Financial Planning:

    These are the advantages of financial planning; It will set out clearly the money that you need to put together to start the business and then to run it for a period. It will help you to obtain funding if you need it. It will help prevent you from going into a business that will not be successful. Highlight periods where your business may need extra financial help. Inspire confidence in lenders and banks that you may have to approach for finance. It will help you to spot problems early so you can make plans for the necessary solution. For example, it will highlight whether you are holding too much stock or whether your collection is less than it should be or that you will be short of cash at a particular time.

    These are the disadvantages of financial planning; It can be a costly process because you will need the assistance of your accountant or financial adviser. It can take a lot of time, A financial plan merely forecasts and accounting.

    Limitations of Financial Planning:

    Some of the limitations of financial planning are discussed as follows:

    These are:

    • Forecasting.
    • Changes.
    • A Problem of Coordination, and.
    • Rapid Changes.

    Now, explain each one;

    Forecasting:

    Financial plans are prepared by taking into account the expected situations in the future. Since the future is always uncertain and things may not happen as these are expected, so the utility of financial planning is limited. The reliability of financial planning is uncertain and very much doubted.

    Changes:

    Once a financial plan is prepared then it becomes difficult to change it. A changed situation may demand a change in financial plan but managerial personnel may not like it. Even otherwise, assets might have been purchased and raw material and labor costs might have been incurred. It becomes very difficult to change a financial plan under such situations.

    A Problem of Coordination:

    The financial function is the most important of all the functions. Other functions influence a decision about the financial plan. While estimating financial needs, production policy, personnel requirements, marketing possibilities are all taken into account.

    Unless there is a proper-co­ordination among all the functions, the preparation of a financial plan becomes difficult. Often there is a lack of coordination among different functions. Even indecision among personnel disturbs the process of financial planning.

    Rapid Changes:

    The growing mechanization of the industry is bringing rapid changes in the industrial process. The methods of production, marketing devices, consumer preferences create new demands every time. The incorporation of new changes requires a change in financial plan every time.

    Once investments are made in fixed assets then these decisions cannot be reversed. It becomes very difficult to adjust a financial plan for incorporating fast-changing situations. Unless a financial plan helps the adoption of new techniques, its utility becomes limited.

    Understand the Process of Financial Planning:

    Following decisions are included in financial planning or process of financial planning is as under:

    Objectives:

    In the first stage, financial objectives of the organization are determined. Financial objectives of an organization may be of two kinds:

    • Short-term: It includes the maintenance of adequate liquidity in the organization,
    • Long-term: It includes the procurement of adequate finance from different sources so as to increase the efficiency of the organization.
    Policies:

    In the second stage of financial planning, financial policies are determined so that financial objectives could be achieved. It includes capitalization policy, capital structure policy; fixed assets management policy, dividend policy, working capital management policy, credit policy, etc.

    For instance, in respect of capital structure, the policy of the company may be to depend on equity share capital in the initial years; regarding distribution of dividend, the policy may be to keep the rate of dividend low in the initial years, regarding credit sale the policy of the organization may be to sell goods on credit to creditworthy customers alone.

    Procedures:

    In the third stage of financial planning, financial procedures are determined. Procedures are clearer than policies. In case of a procedure, it is laid down in what order a job will be performed. For instance, the decision regarding depending on equity capital in the initial years of the company is a policy but the different steps taken to procure equity capital fall under the category of financial procedure.

    Similarly, credit sale is a policy but prescribing the sequence of action to be taken in case of non-realisation of payment on time, is a financial procedure.

    Financial Planning Steps Elements Advantages Limitations
    Financial Planning: Steps, Elements, Advantages, Limitations. Image credit from #Pixabay.

  • Financial Planning: Meaning, Definition, Objectives, and Importance

    Financial Planning: Meaning, Definition, Objectives, and Importance

    What is Financial Planning? Financial planning is an important part of financial management. A financial plan is an estimate of the total capital requirements of the company. It selects the most economical sources of finance. It also tells us how to use this finance profitably. The financial planning gives a total picture of the future financial activities of the company. It is the process of determining the objectives; policies, procedures, programmes, and budgets to deal with the financial activities of an enterprise. Financial planning is also known as capital planning. So, what we discussing is – Financial Planning: Meaning, Definition, Objectives, and Importance.

    The Concept of Financial Planning explains their key points into Meaning, Definition, Objectives, and Importance.

    In this article we Discuss; Financial Planning: Meaning of Financial Planning, Definition of Financial Planning, Objectives of Financial Planning, Need for Financial Planning, and the Importance of Financial Planning. Meaning and Definition: Financial planning reflects the needs of the business and is integrated with the overall business planning. Proper financial planning is necessary to enable the business enterprise to have the right amount of capital to continue its operations efficiently.

    Financial planning involves taking certain important decisions so that funds are continuously available to the company and are used efficiently. These decisions highlight the scope of financial planning. The financial plan is generally prepared during the promotion stage. It is prepared by the Promoters (entrepreneurs) with the help of experienced (practicing) professionals. The promoters must be very careful while preparing the financial plan. This is because a bad financial plan will lead to over-capitalization or under-capitalization. It is very difficult to correct a bad financial plan. Hence immense care must be taken while preparing a financial plan.

    #Definition of Financial Planning:

    Financial planning, also called budgeting, is the process of setting performance goals and organizing systems to achieve these goals in the future. In other words, planning is the process of developing business strategies and visions for the future. It’s big picture stuff. Financial Planning is the process of estimating the capital required and determining its competition. It is the process of framing financial policies in relation to procurement, investment, and administration of funds of an enterprise.

    #Objectives of Financial Planning:

    Financial planning is done to achieve the following two objectives:

    To ensure availability of funds whenever these are required:

    The main objective of financial planning is that sufficient fund should be available in the company for different purposes such as for the purchase of long-term assets, to meet day-to-day expenses, etc. It ensures timely availability of finance. Along with availability financial planning also tries to specify the sources of finance.

    To see that firm does not raise resources unnecessarily:

    Excess funding is as bad as inadequate or shortage of funds. If there is surplus money, financial planning must invest it in the best possible manner as keeping financial resources idle is a great loss for an organization.

    Others Financial Planning has got many objectives to look forward to:

    • Determining capital requirements; This will depend upon factors like the cost of current and fixed assets, promotional expenses and long-range planning. Capital requirements have to be looked with both aspects: short- term and long- term requirements.
    • Determining capital structure; The capital structure is the composition of capital, i.e., the relative kind and proportion of capital required in the business. This includes decisions of debt-equity ratio- both short-term and long-term.
    • Framing financial policies with regards to cash control, lending, borrowings, etc.
    • A finance manager ensures that the scarce financial resources are maximally utilized in the best possible manner at least cost in order to get maximum returns on investment.

    Financial Planning includes both short-term as well as the long-term planning. Long-term planning focuses on capital expenditure plan whereas short-term financial plans are called budgets. Budgets include a detailed plan of action for a period of one year or less.

    #Need for Financial Planning:

    The following financial planning below are:

    • Determine the financial resources required to meet the company’s operating programme.
    • Forecast the extent to which these requirements will be met by internal generation of funds and the extent to which they will be met from external sources.
    • Develop the best plans to obtain the required external funds.
    • Establish and maintain a system of financial control governing the allocation and use of funds.
    • Formulate programmes to provide the most effective profit-volume-cost relationships.
    • Analyze the financial results of operations, and.
    • Report facts to the top management and make recommendations on future operations of the firm.

    #Importance of Financial Planning:

    Sound financial planning is essential for the success of any business enterprise. It will provide policies and procedures to achieve close coordination between the various functional areas of business. This will lead to the minimization of wastage of resources. Management can follow an integrated approach to the formulation of financial policies, procedures, and programmes only if there is a sound financial plan.

    The important benefits of financial planning to a business are discussed below:

    • Financial planning provides policies and procedures for the sound administration of the finance function.
    • Financial planning results in the preparation of plans for the future. Thus, new projects could be undertaken smoothly.
    • Adequate funds have to be ensured.
    • Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.
    • Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning.
    • Financial Planning helps in making growth and expansion programmes which helps in long-run survival of the company.
    • Financial planning ensures required funds from various sources for the smooth conduct of business.
    • Uncertainty about the availability of funds is reduced. It ensures the stability of business operations.
    • Financial planning attempts to achieve a balance between the inflow and outflow of funds. Adequate liquidity is ensured throughout the year. This will increase the reputation of the company.
    • Cost of financing is kept to the minimum possible and scarce financial resources are used judiciously.
    • Financial planning serves as the basis of financial control. The management attempts to ensure utilization of funds in tune with the financial plans.
    • Financial Planning reduces uncertainties with regards to changing market trends which can be faced easily through enough funds, and.
    • Financial Planning helps in reducing the uncertainties which can be a hindrance to the growth of the company. This helps in ensuring stability and profitability in concern.

    Finance is the life-blood of the business. So financial planning is an integral part of the corporate planning of the business. Financial Planning is the process of framing objectives, policies, procedures, programmes and budgets regarding the financial activities of concern. This ensures effective and adequate financial and investment policies. All business plans depend upon the soundness of financial planning.

    Financial Planning Meaning Definition Objectives and Importance
    Financial Planning: Meaning, Definition, Objectives, and Importance. Image credit from #Pixabay.

  • Explain are the Nature and Features of Planning in Business!

    Explain are the Nature and Features of Planning in Business!

    Learn and Understand, Explain are the Nature and Features of Planning in Business!

    Modern managers are facing the challenge of designing a sound action plan for their organizations to achieve their organizational goals. Planning gives a scientific direction to managers as to where the firm has to move to attain its objectives. A good organizational plan minimizes risk, reduces uncertainties surrounding business conditions, and it classifies the consequences of related action. Also learn, Concepts of Management, Explain are the Nature and Features of Planning in Business!

    Planning increases the degree of success and establishes co-ordinated effort in the organization. It makes the managers future-oriented and their decisions co-ordinated. Good planning makes the organizations reach their objectives. In this backdrop, various issues of planning are narrated in the following paragraphs.

    A careful analysis of the above definitions of planning reveals that:

    • Planning is concerning with future and its essence is looking ahead.
    • It involves thinking and analysis of information.
    • It involves a predetermined course of action.
    • It’s concerning with the establishment of objectives to attain in the future.
    • It’s fundamentally a problem of choosing after a careful study of alternative courses.
    • It involves decision-making.
    • Its objectives are to achieve better results, and.
    • It is a continuous and integrated process.

    For instance, we find that the head of the family plans his expenditure, the housewife plans her daily chores, the teacher plans his teaching work, the student plans his studies and the farmer plans his agricultural activities. In the business field, the need for planning is all the more because of various factors such as fluctuations in demand, growing competition, the introduction of new products, scarcity of resources, changing technology, change in prices, government policy, etc. Organisational activity without a plan is likely to be ineffective and will drift without achieving success. Hence, planning is a must for business organizations.

    Few Main Nature and Features of Planning in Business!

    The following facts come to light about its nature and features:

    (1) It is Focuses on Achieving Objectives:

    Management begins with planning and planning begins with the determining of objectives. In the absence of objectives, no organization can ever think about. With the determining of objective, the way to achieve the objective is deciding in the planning.

    In case, it is necessary to change the previously decided course of action for the attainment of objectives, there is no hesitation to do so. It is thus clear that planning is helpful in the attainment of objectives.

    For example, a company decides to achieve annual sales of? 12 crores. After deciding upon this objective, planning to achieve this objective shall immediately come into force. It was thought to achieve this objective by giving advertisement in the newspapers.

    After some time it comes to know that the medium of advertisement appeared to be incapable of achieving the target. In such a situation the medium of advertisement can change and it can shift from newspapers to television in this way, every possible change is made through the planning activities for the purpose of achieving the objective.

    (2) Planning is Primary Function of Management:

    Planning is the first important function of management. The other functions, e.g., organizing, staffing, directing and controlling come later. In the absence of planning, no other function of management can perform.

    This is the base of other functions of management. For example, a company plans to achieve a sales target of 112 crores a year. In order to achieve this target the second function of management, i.e., organizing comes into operation.

    Under it, the purchase, sales, production and financial activities are deciding upon. In order to complete these activities, different departments and positions are deciding upon. The authority and responsibility of every position are deciding upon.

    After the work of organizing, information about the number of different people at different levels require to achieve the objective shall have to provide. This job will perform understaffing. Similarly, planning is the base of other functions like directing and controlling.

    (3) It is Pervasive:

    Since the job of planning is performing by the managers at different levels working in the enterprise, it is appropriate to call it all-pervasive. Planning is an important function of every manager; he may be a managing director of the organization or a foreman in a factory.

    The time spent by the higher-level managers in the process of planning is comparatively more than the time spent by the middle-level and lower-level managers. It is, therefore, clear that all the managers working in an enterprise have to plan their activities.

    For example, the decision to expand the business is taken by the higher-level managers. The decision to sell products is taken by the middle-level and lower-level managers. Also read, The Theory of Human Relationship Management!

    (4) It is Continuous:

    Planning is a continuous process for the following reasons:

    (a) Plans are preparing for a particular period. Hence, there is the need for a new plan after the expiry of that period.

    (b) In case of any discrepancy, plans are to revise.

    (c) In case of rapid changes in the business, environment plans are to revise.

    (5) Planning is Futuristic:

    Planning decides the plan of action what is to do, how is it to do, when it to do, by whom is it to do all these questions are related to future. Under planning, answers to these questions are found out.

    While an effort is making to find out these answers, the possibility of social, economic, technical and changes in the legal framework is kept in mind. Since planning is concerning with future activities, it is called futuristic.

    For example, a company is planning to market a new product. While doing so it shall have to keep in mind the customs and the interests/tastes of the people and also the possibility of any change in them.

    (6) Planning Involves Decision Making:

    Planning becomes a necessity when there are many alternatives to do a job. A planner chooses the most appropriate alternative. Therefore, it can assert that planning is a process of selecting the best and rejecting the inappropriate. It is, therefore, observed that planning involves decision making.

    For example, Mr. Anthony lives in a town where only commerce stream is taught in schools. His daughter has passed matrix and wants to get admission in 10 + 1. It is evident that there is only one option for her, i.e., commerce. Do you know about, What is Financial Management?

    She doesn’t have to think or plan anything. On the other hand, if all the three faculties’ art, science & commerce were available in the schools, she would have to definitely think and plan about the subject of study. It would have been nothing but decision making in this case.

    (7) It is a Mental Exercise:

    Planning is known as a mental exercise as it is related to thinking before doing something. A planner has mainly to think about the following questions:

    (i) What to do? (ii) How to do it? (iii) When to do it? (iv) Who is to do it?

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  • Discussion of the main Nature of Planning!

    Discussion of the main Nature of Planning!

    Learn and Understand, Discussion in the Nature of Planning!

    A plan is a predetermined course of action to achieve a specified goal. It is an intellectual process characterized by thinking before doing. It is an attempt on the part of the manager to anticipate the future in order to achieve better performance. Also learn, Planning is the primary function of management, now get Discussion of the main Nature of Planning!

    First, Discussing Definitions of Planning: Different authors have given different definitions of planning from time to time.

    The main definitions of planning are as follows:

    • According to Alford and Beatt, “Planning is the thinking process, the organized foresight, the vision based on fact and experience that is required for intelligent action.”
    • According to Theo Haimann, “Planning is deciding in advance what is to do. When a manager plans, he projects a course of action for further attempting to achieve a consistent co-ordinate structure of operations aimed at the desired results.
    • According to Billy E. Goetz, “Planning is fundamentally choosing and a planning problem arises when an alternative course of action is discovered.”
    • According to Koontz and O’ Donnell, “Planning is an intellectual process, conscious determination of course of action, the basing of the decision on purpose, facts and considered estimates.”
    • According to Allen, “A plan is a trap laid to capture the future.”

    The following are the essential characteristics of planning which describe the main nature of planning:

    1. Planning is the primary function of management:

    The functions of management are broadly classified as planning, organization, direction, and control. It is thus the first function of management at all levels. Since planning is involving in all managerial functions, it is rightly called as an essence of management.

    2. Planning focuses on objectives:

    Planning is a process to determine the objectives or goals of an enterprise. It lays down the means to achieve these objectives. The purpose of every plan is to contribute to the achievement of objectives of an enterprise.

    3. Planning is a function of all managers:

    Every manager must plan. A manager at a higher level has to devote more time to planning as compared to persons at the lower level. So the President or Managing director of a company devote more time to planning than the supervisor.

    4. Planning as an intellectual process:

    Planning is a mental work basically concerning with thinking before doing. It is an intellectual process and involves creative thinking and imagination. Wherever planning is done, all activities are orderly undertaken as per plans rather than on the basis of guesswork. Planning lays down a course of action to follow on the basis of facts and consider estimates, keeping in view the objectives, goals, and purpose of an enterprise.

    5. Planning as a continuous process:

    Planning is a continuous and permanent process and has no end. A manager makes new plans and also modifies the old plans in the light of information received from the persons who are concerning with the execution of plans. It is a never-ending process. Explain are What is the Importance of Planning in Management?

    6. Planning is dynamic (flexible):

    Planning is a dynamic function in the sense that the changes and modifications are continuously done in the planning course of action on account of changes in business environment.

    As factors affecting the business are not within the control of management, necessary changes are made as and when they take place. If modifications cannot include in plans it is said to be bad planning.

    7. Planning secures efficiency, economy, and accuracy:

    A prerequisite planning is that it should lead to the attainment of objectives at the least cost. It should also help in the optimum utilization of available human and physical resources by securing efficiency, economy, and accuracy in the business enterprises. Planning is also economical because it brings down the cost to the minimum.

    8. Planning involves forecasting:

    Planning largely depends upon accurate business forecasting. The scientific techniques of forecasting help in projecting the present trends into future. “It is a kind of future picture wherein proximate events are out-line with some distinctness while remote events appear progressively less distinct”.

    9. Planning and linking factors:

    A plan should formulate in the light of limiting factors which may be any one of five M’s viz., men, money, machines, materials, and management.

    10. Planning is realistic:

    A plan always outlines the results to attain and as such, it is realistic in nature. Also read, Definition, Importance, and Affected Factors of Manpower Planning!

    Another, main Nature of Planning also helps fully!

    Planning is an Intellectual Process!

    Planning is an intellectual process of thinking in advance. It is a process of deciding the future on the series of events to follow. Planning is a process where a number of steps are to take to decide the future course of action. Managers or executives have to consider various courses of action, achieve the desired goals, go in details of the pros and cons of every course of action and then finally decide what course of action may suit them best.

    Planning Contributes to the Objectives!

    Planning contributes positively to attaining the objectives of the business enterprise. Since plans are there from the very first stage of operation, the management is able to handle every problem successfully. Plan try to set everything right. A purposeful, sound and effective planning process knows how and when to tackle a problem. This leads to success. Objectives thus are easily achieving. Don’t forget to read, the Features, Nature, Characteristics of Planning!

    Planning is a Primary Function of Management!

    Planning precedes other functions in the management process. Certainly, the setting of goals to achieve and lines of action to follow precedes the organization, direction, supervision, and control. No doubt, planning precedes other functions of management. It is primary requisite before other managerial functions step in. But all functions are inter-connect. It is mixing in all managerial functions but there too it gets precedence. It thus gets primary everywhere.

    A continuous Process!

    Planning is a continuous process and a never ending activity of a manager in an enterprise based upon some assumptions which may or may not come true in the future. Therefore, the manager has to go on modifying revising and adjusting plans in the light of changing circumstances. According to George R. Terry, “Planning is a continuous process and there is no end to it. It involves the continuous collection, evaluation and selection of data, and scientific investigation and analysis of the possible alternative courses of action and the selection of the best alternative”.

    Planning Pervades Managerial Activities!

    From primary of planning follows pervasiveness of planning. It is the function of every managerial personnel. The character, nature, and scope of planning may change from personnel to personnel but the planning as an action remains intact. According to Billy E. Goetz, “Plans cannot make an enterprise successful. The action is requiring, the enterprise must operate managerial planning seeks to achieve a consistent, coordinated structure of operations focus on desire trends. Without plans, action must become merely activity producing nothing but chaos”.

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  • Description of the Key Characteristics of the Planning!

    Description of the Key Characteristics of the Planning!

    Learn and Understand, Description of the Key Characteristics of the Planning!

    Planning involves setting objectives and deciding in advance the appropriate course of action to achieve these objectives so we can also, define planning as setting up of objectives and targets and formulating an action plan to achieve them. After that also, discuss the main steps involved in the planning process in an organization. Also learn, What is the Importance of Planning in Management? Description of the Key Characteristics of the Planning!

    Another important ingredient of planning is time. Plans are always developed for a fixed time period as no business can go on planning endlessly. Also, keeping in mind the time dimension we can define planning as “Setting objectives for a given time period, formulating various courses of action to achieve them and then selecting the best possible alternative from the different courses of actions”.

    The main key Characteristics of Planning!

    It is goal-oriented.

    • Planning is made to achieve the desired objective of business.
    • The goals established should general acceptance otherwise individual efforts & energies will go misguided and misdirected.
    • Planning identifies the action that would lead to desired goals quickly & economically.
    • It provides a sense of direction to various activities. E.g. Maruti Udhyog is trying to capture once again Indian Car Market by launching diesel models.

    It is looking ahead.

    • Planning is done for future.
    • It requires peeping in future, analyzing it and predicting it.
    • Thus planning is based on forecasting.
    • A plan is a synthesis of the forecast.
    • It is a mental predisposition for things to happen in future.

    It is an intellectual process.

    • Planning is a mental exercise involving creative thinking, sound judgment, and imagination.
    • It is not a mere guesswork but a rotational thinking.
    • A manager can prepare sound plans only if he has sound judgment, foresight, and imagination.
    • Planning is always based on goals, facts and considered estimates.

    It involves choice & decision making.

    • Planning essentially involves the choice among various alternatives.
    • Therefore, if there is only one possible course of action. As well as, there is no need planning because there is no choice.
    • Thus, decision making is an integral part of planning.
    • A manager is surrounding by no. of alternatives. Also, he has to pick the best depending on requirements & resources of the enterprises.

    It is the primary function of management / Primacy of Planning.

    • Planning lays the foundation for other functions of management.
    • It serves as a guide for organizing, staffing, directing and controlling.
    • All the functions of management are performing within the framework of plans laid out.
    • Therefore planning is the basic or fundamental function of management.

    It is a Continuous Process.

    • Planning is a never ending function due to the dynamic business environment.
    • Plans are also preparing for specific period f time and at the end of that period, plans are subjecting to revaluation and review in the light of new requirements and changing conditions.
    • Planning never comes into end till the enterprise exists issues, problems may keep cropping up and they have to tackle by planning effectively.

    Planning is all Pervasive.

    • It is requiring at all levels of management and in all departments of the enterprise.
    • Of course, the scope of planning may differ from one level to another.
    • The top level may be more concerned about planning the organization as a whole whereas the middle level may be more specific in departmental plans and the lower level plans implementation of the same.

    It is designing for efficiency.

    • Planning leads to accomplishment of objectives at the minimum possible cost.
    • It avoids wastage of resources and ensures adequate and optimum utilization of resources.
    • A plan is worthless or useless if it does not value the cost incurred on it.
    • Therefore planning must lead to the saving of time, effort, and money.
    • Planning leads to proper utilization of men, money, materials, methods, and machines.

    It is Flexible.

    • Planning is done for the future.
    • Since future is unpredictable, planning must provide enough room to cope with the changes in customer’s demand, competition, govt. policies etc.
    • Under changed circumstances, the original plan of action must revise and updated to make it more practical.

    The Main Steps Involving the Planning Process!

    The few main steps involved in the planning process in an organization.

    Environment Analysis:

    The external environment covers uncontrollable and unpredictable factors such as technology, market (prices, Competition, customers, etc.), socio-economic climate, political conditions and ecological conditions within which our plans will have to operate. Also read, What is the Process of Manpower Planning?

    Also, the internal environment covers relatively controllable factors, such as personnel resources, technology, knowledge, finance, facilities, etc., at the disposal of the firm. The study of the environment or situation analysis will reveal the threats to be met and the opportunities to exploit as well as strengths and weaknesses.

    Determination of Mission and Objectives:

    The situation analysis will serve as a background for the formulation of our mission and objectives.

    A mission provides the central or basic purpose answering a few basic questions:

    (1) What is our business?

    (2) Who are our customers?

    (3) What is our economic and social responsibility? and so on.

    The mission or creed statement will ensure purposeful life for our enterprise in the Justness world. It will give firm direction and make our activities meaningful and interesting.

    On the basis of situation analysis and our balance sheet of assets and liabilities, we can easily take the first step in actual business planning, viz., the setting of the hierarchy of objectives — overall comparable objectives as well as divisional and departmental objectives. Objectives and goals are formulating at each level of management.

    “Developing Strategies”:

    Objectives give us the precise idea regarding our destination, i.e., where we want to go. The real problem is how to find the best way to achieve the stated objectives.

    Finding the best way to go there (where we want to be) is called strategy development, Objectives answer the question:

    What business is going to be? Strategy answers the question: How best can the business achieve under intelligent competition? The strategy is the magic wand of action to accomplish our objectives; For each functional area of our business, we will formulate our strategic i.e., desirable means to achieve stated ends or objectives.

    Developing Programmes or Action Plans:

    On the basis of our objectives and strategies, we will now formulate our detailed programmes or time-bound action plans to achieve specific goals or targets.

    An action plan has three elements:

    (1) The time limit of performance,

    (2) The allocation of tasks to personnel in each department,

    (3) The time­table or schedule of work to accomplish targets within the stated period.

    Control Mechanism:

    Control is the final phase of our planning, process. It is the other half of planning. Control is the extension of the planning process and the two take place together. Also, Control answers the question: How will we know where we are in future? By means of feedback loop, it ensures accomplishment of objectives.

    Results or performance will compare with standards. If deviations are noted, corrective actions are taking in time. Thus planning-action-control-re-planning cycle assures the achievement of our goals or objectives.

    Description of the Key Characteristics of the Planning - ilearnlot
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  • Explain are the Features, Nature, Characteristics of Planning!

    Explain are the Features, Nature, Characteristics of Planning!

    Learn and Understand, Explain are the Features, Natures, Characteristics of Planning!

    Planning is a particular type of decision making that addresses the specific future that managers desire for their organizations. It is the process of fixing goals of the business and finding the ways to attain these goals. The plan will help the managers to organize people and resources effectively. Plans develop confidence in managers. Also, the importance of planning in management, Explain are the Features, Nature, Characteristics of Planning!

    Planning is the first managerial function to perform in the process of management. It is concerning with deciding in advance what is to do, when, where, how and by whom it is to do. Thus, it is a predetermined course of action to achieve a specified aim or goal.

    All organizations whether it is the government, a private business or small businessman require planning. To turn their dreams of increase in sale, earning the high profit and getting success in business all businessmen have to think about future; make predictions and achieve the target. To decide what to do, how to do and when to do they do planning.

    Meaning of Planning!

    Planning can define as “thinking in advance what is to do when it is to do, how it is to do and by whom it should do”. In simple words we can say, planning bridges the gap between where we are standing today and where we want to reach.

    Planning involves setting objectives and deciding in advance the appropriate course of action to achieve these objectives. So, we can also define planning as setting up of objectives and targets and formulating an action plan to achieve them.

    Another important ingredient of planning is time. Plans are always developing for a fix time period as no business can go on planning endlessly.

    Keeping in mind the time dimension we can define planning as “Setting objectives for a given time period, formulating various courses of action to achieve them and then selecting the best possible alternative from the different courses of actions”.

    The definitions of planning given by the different writers are listing here.

    In the words of Alfred and Beatty, “Planning is thinking process, the organizing foresight, the vision based on facts and experience that is requiring intelligent action.”

    According to Koontz and O’Donnell, “Planning is essentially decision-making since it involves choosing from among alternatives.” According to George Terry, “Planning is the selecting and relating of facts and making and using of assumptions regarding. The future in the visualization and formulation of proposing activities believes necessary to achieve the desired results.”

    The following Features, Nature, Characteristics of Planning are!

    1. Planning contributes to Objectives:

    Planning starts with the determination of objectives. We cannot think of planning in absence of objective. After setting up of the objectives, planning decides the methods, procedures, and steps to take for the achievement of set objectives. Planners also help and bring changes in the plan if things are not moving in the direction of objectives.

    For example, if an organization has the objective of manufacturing 1500 washing machines and in one month only 80 washing machines are manufacturing. Then changes are making the plan to achieve the final objective.

    2. Planning is the Primary function of management:

    Planning is the primary or first function performing by every manager. No other function can execute by the manager without performing planning function because objectives are set up in planning and other functions depend on the objectives only.

    For example, in organizing function, managers assign authority and responsibility to the employees and level of authority and responsibility depends upon objectives of the company. Similarly, in staffing, the employees are appointed. The number and type of employees again depend on the objectives of the company. So planning always proceeds and remains at no. 1 as compared to other functions.

    3. Pervasive:

    Planning is requiring at all levels of the management. It is not a function restricted to top-level managers only but planning is done by managers at every level. Formation of major plan and framing of overall policies is the task of top-level managers whereas departmental managers form the plan for their respective departments. And lower level managers make plans to support the overall objectives and to carry on the day to day activities.

    4. Planning is futuristic/Forward-looking:

    The Planning always means looking ahead or planning is a futuristic function. A Planning is never done in the past. All the managers try to make predictions and assumptions for future and these predictions are creating on the basis of past experiences of the manager and with the regular and intelligent scanning of the general environment.

    5. Planning is continuous:

    Planning is a never-ending or continuous process because after making plans also one has to be in touch with the changes in changing the environment and in the selection of one best way.

    So, after making plans also planners keep making changes in the plans according to the requirement of the company. For example, if the plan is made during the boom period and during its execution. There is depression period then planners have to make changes according to the conditions prevailing.

    6. Planning involves decision making:

    The planning function is needed only when different alternatives are available and we have to select the most suitable alternative. We cannot imagine planning in absence of choice because in planning function managers evaluate various alternatives and select the most appropriate. But if there is one alternative available then there is no requirement of planning.

    For example, to import the technology if the license is only with STC (State Trading Co-operation) then companies have no choice but to import the technology through STC only. But if there are 4-5 import agencies including in this task then the planners have to evaluate terms and conditions of all the agencies and select the most suitable from the company’s point of view.

    7. Planning is a mental exercise:

    It is the mental exercise. Planning is a mental process which requires higher thinking that is why it is kept separate from operational activities by Taylor. In planning assumptions and predictions regarding future are made by scanning the environment properly. This activity requires the higher level of intelligence. Secondly, in planning various alternatives are evaluated and the most suitable is selected which again requires the higher level of intelligence. So, it is right to call planning an intellectual process.

    Main Nature or Characteristics of Planning!

    The following are the important characteristics of planning:

    1. Focus on objectives.

    A plan starts with the setting of objectives and then makes efforts to realize them by developing policies, procedures, strategies, etc.

    2. It is an intellectual process.

    According to Koontz and O’Donnell, planning is an intellectual process involving mental exercise, foreseeing future developments, making forecasts and the determination of the best course of action.

    3. Planning is a selective process.

    It involves the selection of the best one after making a careful analysis of various alternative courses of action. It is concerning with decision-making relating to (a) what is to do, (b) how it is to do, (c) when it is to do, and (d) by whom it is to do.

    4. Planning is pervasive.

    Planning is a pervasive activity covering all the levels of an enterprise. While top management is concerning with strategical planning, the middle management and the lower management are concerning with administrative planning and operational planning respectively.

    5. Planning is an integrated process.

    Planning involves not only the determination of objectives but also the formulation of sound policies, programmes, procedures and strategies for the accomplishment of these objectives. It is the first of the managerial functions and facilitates other managerial functions like organizing, staffing, directing and controlling.

    6. Planning is directed towards efficiency.

    To increase the efficiency of the enterprise is the main purpose of planning. The guiding principles of a good plan are the maximum output and profit at the minimum cost. Terry has aptly stated that “planning is the foundation of the most successful action of an enterprise.”

    7. Planning is flexible.

    The process of planning should be adaptable to the changes take place in the environment. Koontz and O’Donnell emphasize that “effective planning requires continual checking on events and forecasts and the redrawing of plans to maintain a course towards a designed goal.”

    8. The first function in the process of management.

    Planning is the beginning of the process of management. A manager must plan before he can possibly organize, staff, direct/control. Because planning sets all other functions into action, it can see as the most basic function of the management. Without planning, other functions become the meaningless activity, producing nothing, but chaos.

    9. It is a decision-making process.

    Decision-making is an integral part of planning. It is defined as the process of choosing among alternatives. Obviously, decision-making will occur at many points in the planning process. For example, in planning for their organization, the managers first decide which goals to pursue: shall we manufacture all parts internally or buy some parts from outside?

    10. It is a continuous process.

    Planning is a continuous process. Koontz and Donnell rightly observe that like a navigator constantly checking where his ship is going in the vast ocean, a manager should constantly watch the progress of his plans. He must constantly monitor the conditions, both within and outside the organization, to determine if changes are requiring in his plans.

  • Explain are What is the Importance of Planning in Management?

    Explain are What is the Importance of Planning in Management?

    Learn and Understand, Explain are What is the Importance of Planning in Management?

    While planning does not guarantee success in organizational objectives, there is evidence that companies that engaged in formal planning consistently performed better than those with none or limited formal planning and improved their own performance over a period of time. It is very rare for an organization to succeed solely by luck or circumstances. Also learn, Vision Statement, What is the Importance of Planning in Management?

    Some of the reasons as to why planning is considering a vital managerial function are given below:

    Planning is essential in modern business:

    The growing complexity of the modern business with rapid technological changes, dynamic changes in the consumer preferences and growing tough competition necessities orderly operations, not only in the current environment but also in the future environment. Since planning takes a future outlook, it takes into account the possible future developments.

    Planning affects performance:

    A number of empirical studies provide evidence of organizational success being a function of formal planning, the success is measuring by such factors as return on investment, sales volume, and growth in earnings per share and so on. An investigation of firms in various industrial products as machinery, steel, oil, chemicals, and drugs revealed that companies that engaged in formal planning consistently performed better than those with no formal planning.

    Planning puts focus on objectives:

    The effectiveness of formal planning is primarily based on clarity of objectives. Objectives provide a direction and all planning decisions are directing towards the achievement of these objectives. Plans continuously reinforce the importance of these objectives by focusing on them. This ensures maximum utility of managerial time and efforts.

    Planning anticipates problems and uncertainties:

    A significant aspect of any formal planning process in the collection of relevant information for the purpose of forecasting the future as accurately as possible. This would minimize the chances of haphazard decisions. Since the future needs of the organization are anticipating in advance, the proper acquisition and allocation of resources can plan, thus minimizing wastage and ensuring the optimal utility of these resources.

    Planning is necessary to facilitate control:

    Controlling involves the continual analysis and measurement of actual operations against the established standards. These standards are set in the light of objectives to by achieve. Periodic reviews of operations can determine whether the plans are being implemented correctly. Well-developed plans can aid the process of control in two ways.

    First, the planning process establishes a system of advance warning of possible deviations from the expected performance.  The second contribution of planning to the control process is that it provides quantitative data which would make it easier to compare the actual performance in quantitative terms, not only with the expectations of the organization but also with the industry statistics or market forecasts.

    Planning helps in the process of decision making:

    Since planning specifies the actions and steps to take in order to accomplish organizational objectives, it serves as a basis for decision-making about future activities. It also helps managers to make routine decisions about current activities since the objectives, plans, policies, schedules and so on are clearly laying down.

    Importance of planning in management is!

    Planning is the first and most important function of management. It is needed at every level of management. In the absence of planning all the business activities of the organization will become meaningless. The importance of planning has increased all the more in view of the increasing size of organizations and their complexities.

    Planning has again gained importance because of uncertain and constantly changing business environment. In the absence of planning, it may not be impossible but certainly difficult to guess the uncertain events of future.

    The following facts show the advantages of planning and its importance for a business organization:

    (1) Planning Provides Direction:

    Under the process of planning the objectives of the organization are defining in simple and clear words. The obvious outcome of this is that all the employees get a direction and all their efforts are focusing towards a particular end. In this way, planning has an important role in the attainment of the objectives of the organization.

    For example, suppose a company fixes a sales target under the process of planning. Now all the departments, e.g., purchase, personnel, finance, etc., will decide their objectives in view of the sales target.

    In this way, the attention of all the managers will get focusing on the attainment of their objectives. This will make the achievement of sales target a certainty. Thus, in the absence of objectives, an organization gets disable and the objectives are laying down under planning.

    (2) Planning Reduces Risks of Uncertainty:

    Planning is always done for future and future is uncertain. With the help of planning, possible changes in future are anticipating and various activities are planning in the best possible way. In this way, the risk of future uncertainties can minimize.

    For example, in order to fix a sales target, a survey can undertake to find out the number of new companies likely to enter the market. By keeping these facts in mind and planning the future activities, the possible difficulties can avoid.

    (3) Planning Reduces Overlapping and Wasteful Activities:

    Under planning, future activities are planning in order to achieve objectives. Consequently, the problems of when, where, what and why are almost deciding. This puts an end to disorder and suspicion. In such a situation coordination is establishing among different activities and departments. It puts an end to overlapping and wasteful activities.

    Consequently, wastages move towards nil, efficiency increases and costs get to the lowest level. For example, if it is deciding that a particular amount of money will require in a particular month, the finance manager will arrange for it in time.

    In the absence of this information, the amount of money can be more or less than the requirement in that particular month. Both these situations are undesirable. In case, the money is less than the requirement, the work will not complete and in case it is more than the requirement, the amount will remain unused and thus cause a loss of interest.

    (4) Planning Promotes Innovative Ideas:

    It is clear that planning selects the best alternative out of the many available. All these alternatives do not come to the manager on their own, but they have to discover. While making such an effort of discovery, many new ideas emerge and they are studying intensively in order to determine the best out of them.

    In this way, planning imparts a real power of thinking in the managers. It leads to the birth of innovative and creative ideas. For example, a company wants to expand its business. This idea leads to the beginning of the planning activity in the mind of the manager. He will think like this:

    • Should some other varieties of the existing products manufacture?
    • ……Retail sales undertake along with the wholesales?
    • ……Some branch open somewhere else for the existing or old product?
    • ……Some new product launch?

    In this way, many new ideas will emerge one after the other. By doing so, he will become habituated to them. He will always be thinking about doing something new and creative. Thus, it is a happy situation for a company which is born through the medium of planning.

    (5) Planning Facilitates Decision Making:

    Decision making means the process of making decisions. Under it, a variety of alternatives are discovering and the best alternative is chosen. The planning sets the target for decision making. It also lays down the criteria for evaluating courses of action. In this way, planning facilitates decision making.

    (6) Planning Establishes Standards for Controlling:

    By determining the objectives of the organization through planning all the people working in the organization and all the departments are informing about ‘when’, ‘what’ and ‘how’ to do things.

    Standards are laying down in their work, time and cost, etc. Under control, at the time of completing the work, the actual work done is comparing with the standard work and deviations are found out and if the work has not been done as desire the person concern is held responsible.

    For example, a laborer is to do 10 units of work in a day (it is a matter of planning), but actually he completes 8 units. Thus there is a negative deviation of 2 units. For this, he is held responsible. (Measurement of actual work, knowledge of deviation and holding the laborer responsible falls under controlling.) Thus, in the absence of planning control is not possible.

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