A process that enables a business enterprise to tackle the uncertainties regarding the availability of funds is called 'financial planning'. Financial planning involves designing a blueprint of the financial operations of a firm. It ensures that the right amount of funds is available for organisational operations at the right time, in order to ensure smooth functioning of the organisation.
Following points highlight the importance of financial planning in an organisation:
(i) Helps in coordination: It helps in coordinating various business activities such as sales, purchase, production, finance etc.
(ii) Helps in optimum utilization of funds: It ensures that situations of inadequate as well as excess funds are avoided, in order to ensure proper and optimum utilisation of funds.
(iii) Links the present and the future needs of funds in the organisation: Financial planning acts as a link between the present needs of funds in the organisation and the future needs of funds in the organisation. This is done by providing information about future availability and requirement of funds.
(iv) Finanical control: All the financial activities are kept under control with the help of financial planning. Under it, the standard of financial performance are set. Actual performance is compared with the standards so set. Deviations and their causes are traced and corrective measures are taken.