The Importance Of Financial Planning

The planning has to do with the establishment of one or more goals to achieve counting human and monetary resources, using them effectively and efficiently, to achieve the same, involving the establishment of policies and strategies to reach the desired goal.

To define the concept of finance from the point of view of the administration is studying the acquisition and management by a state company or individual, money and other values ​​of belonging, that is, about the conditions and opportunities in getting capital, use and liabilities for this.

The plan seeks to balance all levels of the company for the purpose of operating a balanced and efficient in their business and the environment within which it operates (break even).

This important tool allows a projection on the desired results to be achieved by the company, which handles financial information on sales, income, assets, investments and financing, based on production information and sales channels (marketing) in order to meet the financial requirements. 

This is to determine the time when the company found, ie where found, where you are now and where it is going, likewise if things are unfavorable to the company must have a strategy such support is not unprotected and financial alternatives. Their main source of information are the balance sheet (It's a summary of everything that has the company, you should, of what they owe and what really belongs to its owner, to a certain date) and the state Result (profit or loss as the case)

In the financial planning process the company must identify potential changes in operations so that they produce satisfactory results (sensitivity analysis).

In financial planning we talk about two important functions: planning and control. In planning considers the projection of sales revenue generated by you, the means of production, and the resources needed to achieve the established projections (targets). While control is the feedback and adjustments to ensure timely modification for the same unforeseen changes.

The basis for the planning and management control: the cost-volume-utility (CVU) this analysis determines the volume as an object, ie the volume is determined according to the desired operating income or fixed. The most used forms of cost-volume utility are:

• Contribution analysis
• Equilibrium analysis.

Total contribution margin is the difference between total sales and total variable cost.

The Contribution analysis is based on the foundation of cost variability - the identification and separate measurement of the fixed and variable components of cost and this can be by graphical method and analytical method.

Equilibrium analysis is defined here as the possibility that the actual amount is different than expected, "what if" that essentially asks how change an outcome if the original information is achieved predicted or if one of the underlying assumptions change.

How to Save Money on Your Business

The current market is more competitive battlefield that has ever existed, there are even more likely to be struck by lightning, you keep your company running optimally and profits for years.

The daily challenge of traders and entrepreneurs not only sell, but to optimize resources for higher sales revenue and for this there are many ways, but the most significant is the reduction of costs as this can be the key to this optimization .

Any operation in a company, it is simpler, generates an expense. There are very difficult to control expenses, that it is not easy to be aware of all the small actions that are performed within the company, or if do you know how many sheets of paper, pencils, pens, ink or other details are wasted daily minimum in a company? ... We do not and we doubt anyone knows exactly.

ALL OPERATING EXPENSES 

Before starting to analyze how to reduce costs, we must ask the question, do I know the exact cost of what you sell or produce? Countless companies begin to market products and services without having an idea of ​​what that cost, therefore set a price they consider "competitive", but such amounts not only undermine their income but to unleash an endless struggle to survive in the world business by offering lower prices trying to affect competition, but without knowing what is really hurting the company itself, so before attempting to cut costs, start by calculating!.

REDUCE EXPENSES ESTIMATE COSTS

Cost reduction is not only based on start decreasing budgets in all departments. There are other ways to lower the costs of your business, all in finding the most optimal way, creative and innovative to do more with less.

To lower costs requires first of all, know the unit costs of your product or providing the expenses generated by your service to this you follow certain techniques, in which it is essential to have knowledge of accounting to calculate these costs, with Just knowing the basic math, is more than enough.

Once listed company costs and generate concepts that you can think of solutions. This requires being creative and analyze each element in your list seeking alternative suppliers, process redesign, among other things.However this is not all, as well as every action there is a reaction, in a company feel the same, you have to think ahead, consider whether the cost reduction will be presented immediately, short, medium or long term , in order to truly determine the feasibility of change.

DETERMINED YOUR BASIC EXPENSES

Determine the costs of micro or small business can be a simple task, with a bit of analysis and a good use of simple operations, such as addition, subtraction, multiplication and division can be achieved, but more complicated work is in reducing . 

The high costs may be caused by factors outside the company, such as increased prices from suppliers, utilities, among others. In these cases it is necessary to find alternatives for change. 

However, these costs can also be caused by internal company factors, this is where you must think of new ideas and ways of doing business to work in the best conditions, this requires an innovative mind, leave behind traditional and think of the unknown, find solutions to their problems in ways not intended.

International Financial Management

The needs of business growth have led, as always, to enter international trade, ie trade between the different social and political entities called nations. In the past this need arose almost always by the growth of the company.

The efficiency of production systems and economies of scale that companies did turn upon it out of its natural markets in order to continue to grow such as Coca Cola. Other companies grew through the development of a unique and exclusive product whose demand exist globally and that, therefore, required a global response here could mention to Kodak or Ford in the 1920's and 1930's. Others, finally, came to international business because it started as international business, ahem. the oil industry.

For whatever reason, until the 1950s the international business growth came mainly from within, from their own characteristics.

Technological development has made ​​that firms should develop internationally by external causes. Improved communications technology and the ease of movement of capital and goods across the world thanks to the new media has made ​​even smaller companies see the need to develop international activities.

But the extension of the activities of a company to the international arena is not easy. We saw, in discussing social factors, like every human society has developed its own way of seeing the world and human relationships as well as the government saw that view reflect the applicable law within their territories.

When a company was born and raised in a particular social environment are used to that environment, all members share the assumptions of that environment, and the work is carried out smoothly.

When a company comes to the international arena must learn to function in different environments, with different assumptions and different way of doing things. That change is difficult for everyone and sometimes impossible for some, and has a number of additional risks to the administrator, risks to be expected if you want to be successful.

Two Risks for an International Business

Political Risk

It arises from the existence of a foreign government that responds to social needs also outside the company. We said that the government responds to social expectations by providing security to the society it serves. That security may require the government to interfere with the activities of a company, which can reach interference seize the assets of the company.

The big expropriations by the revolutions of the twentieth century are an example of this, but other events expropriation, although less notable are in any way disturbing. The country boasts the largest entrepreneurial freedom, the United States, have laws that allow the government to acquire possession of the resources of companies and foreign investors according to general criteria such as national security assets of the enemy in case of war and simply protecting parties.


If this happens in the country more pro-business world simply increases the risk when we moved countries with more centralized governments and hoarders who resort to these measures to the detriment of foreigners under the reasoning that while they can present their actions as beneficial to his people the feeling abroad is less important.

Political risk is so important that companies should evaluate realistically. Regardless of the promises and guarantees that a government can give a company must not forget that the government responds, finally, not to the company but to their society.

International business requires, therefore, a careful analysis of the trends and social attitudes about business and especially towards foreigners expenses. A joint venture with a local company in the role of secondary partner can also be a good strategy to prevent problems with the local government.

It is also convenient to the local company of the parent company depends on issues such as technology, markets and other services that make local company, by itself, is not sustainable. This reduces the risk of expropriation by making it useless as the local company can not operate by itself without the support of the parent company. This was the strategy followed by the big multinationals like Kodak and IBM when establishing their plants in Overseas countries other than the United States.


Country's Economic and Financial Risk

The other type of risk is the financial risk incurred. Economic risk assumed various aspects, but you can tell that it is primarily a risk. Both the assets of the company and its revenues and profits are measured in the currency of another country. When that country, fundamental economic reasons or circumstantial changes the par value of its currency against the currency of the host country, the foreign assets of the company and its revenues and profits change with it.

When change is for, a revaluation, the company is benefited by the change, but when it devalued the company finds that their investments and income now worth what they were worth and the lower value corresponds get a loss for the year in which the change occurs. This change may negatively impact the company's results in full with consequent problems for her in the markets, its creditors, suppliers and customers.

There are ways to prevent risk and protect against it. The foreign exchange markets provide the so-called futures contracts where a market participant may sell, in advance, the currency of one country to another change ensuring an exchange rate that gives certainty to your financial calculations.

The exhibition company can sell the foreign currency equivalent to the profit you expect to receive in that foreign currency futures market, thus ensuring a favorable exchange rate which may ensure that obtaining an adequate return on investment. Obviously this protection costs and that cost should be considered as part of the cost of doing business abroad, but must say that some tax systems do not see this and not consider it as a legitimate expense for businesses.

The problem incurred to value the assets that the company has in countries other than the country of residence is critical only when you want to sell those assets and repatriate their cost. If the company is established abroad and the value of its assets declines due to a devaluation of the role this loss is not significant and does not have to impact the parent company.

However, when the parent company has attracted funding based on the value of their overseas investments decline in value of these investments has a negative impact on your creditworthiness and may, at any time, making the creditors press for guarantees additional outstanding loans in order to maintain safety margins. This represents a problem for the financial manager and it forces you to commit additional assets in the same credit transaction which means that you can not obtain additional financing if you need them.