For a company to achieve its long-term goals, financial planning is essential. A financial plan refers to several procedures that estimate the amount of capital needed and make assumptions about additional aspects that influence strategic decision-making. For instance, diversification occurs when a company seeks to enter a new market, necessitating financial preparation and careful consideration of many aspects, particularly anticipated expenses.
A company can set short-term goals based on long-term aims and view the bigger picture with the help of financial planning. It also enables one to plan strategic financial decisions and comprehend the future.
A business’s stakeholders might all be considered decision-makers, according to Joseph Stone Capital. Any party with an interest or involvement in the business, or a “stake,” is a stakeholder. Suppliers, stockholders, and potential investors are a few examples of stakeholders. The business portfolio, which contains details about the organization, its vision, aims, and objectives, is usually brought up. But it also refers to financial data, such as cash flow statements, balance sheets, and profit and loss statements.
People who work for a company are “The Agents,” and the owners are known as “The Principals.” The people who work for the company represent the owners and strive to meet their goals. In this particular setting, the primary decision-makers that impact the business might be assumed to be the government, financial institutions, employees, suppliers, and customers.
- Owners of Shares
They are known to be owners because they made investments in the company. A portion of them are members of the Board of Directors, which examines the company’s financial performance, the decisions made by the CEO and senior management, etc., at the annual general meeting. As a result, data on financial performance, including profit and loss records, must be given to them.
- Prospective Investors/Shareholders
They are also known as decision-makers because they can invest within an organization. As such, financial performance data is something they want.
- Financial Institutions
Financial institutions, such as banks, require financial and financial planning information before they may serve as funding sources. Before issuing a loan, they might, for example, look over the company’s profit and loss statement, evaluate the worth of its fixed assets, and demand collateral.
- Suppliers
Suppliers need financial information to meet credit term requirements and assess their position before a sale, maybe on trade credit.
- Authorities
Government agencies check for illicit activities by reviewing financial performance, requiring transparency, and requesting annual financial reports. That guarantees fair competition in the economy and safeguards the public interest, according to Joseph Stone Capital.
- Consumers
A company’s customers must receive clear information about the goods they are purchasing, and the company must maintain reasonable prices.
- Workers
Considering that they make the strategic decisions and deal with the fallout, employees within the company are arguably the most crucial decision-makers. Therefore, for senior management to make decisions on a variety of topics, including budgeting, profits, costs, etc., information from a variety of elements must be presented.
