FISCAL PLANNING

PRESENTED BY : VRUTI PATEL,FINAL YEAR M.Sc.,SNC.

FINANCIAL, FISCAL AND MONETARY

• Financial : relating to finance, which is the commercial activity of providing funds and capital, or to put it the other way, the ways in which individuals and organizations raise money.

• Fiscal : relating to financial matters, especially government tax revenues and government expenditure and debt.

• Monetary : relating to the money supply: the amount of money in circulation, its rate of growth and interest rates.

FINANCIAL MANAGEMENT/ADMNISTRATIO

N

Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise.

Financial administration consists of all those operations, the object of which is to make funds/money available for the organizational activities and to ensure the lawful and efficient use of these funds in order to achieve the organizational goals and objectives.

DEFINITION

Financial management is chiefly concerned with maximizing the wealth of owners through wise and rational investment of funds. It involves the application of general management principles to a particular financial operation.

- Harward and Upton

Financial management is concerned with raising the financial resources and their utilization towards achieving the organizational goals.

- SN Maheshwary

It is the process of putting the available funds to the best advantage from the long term point of view of business objectives.

- Richard A Brealey

OBJECTIVES OF FISCAL PLANNING

To determine capital requirements depend upon factors like cost of current and fixed

assets, promotional expenses and long range planning.

looked with both aspects: short-term and long-term requirements.

To determine capital structure 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..

To frame financial policies• In fiscal planning the policies are framed with

regards to cash control, lending, borrowings, etc.

To utilize financial resources adequately• This is to ensure that the scarce financial

resources are maximally utilized in the best possible manner at least cost in order to get maximum returns on investment.

IMPORTANCE OF FISCAL PLANNING

Ensures provision of adequate funds to meet day to day requirements of the organization as well as its future expansion.

Ensures timely availability of funds. Provides policies, procedures and plans. Helps in ensuring a reasonable balance between

outflow and inflow of funds so that stability is maintained.

Ensures that the suppliers of funds are easily investing in organization which exercise financial planning

Helps in making growth and expansion programmes. Reduces uncertainties with regards to changing

trends which can be faced easily through enough funds.

Helps in ensuring stability and profitability in concern. Provides sound financial control and thus seeks to

eliminate waste of funds. Guides for proper and fuller utilization of available

resources.

STEPS IN FISCAL PLANNING

FACTORS AFFECTING FINANCIAL PLANNING

• Objectives:

Should be made in light of organizational objectives

• Requirements of organization:

The financial plan should be based on the present and future requirements of the organization.

•  

• Economy:

The capital structure should be such that there should be a balance between the cost of the funds and services to be determined.

 • Flexibility:

Financial planning should be such that it ensures flexibility to utilize the funds into more profitable manner.

BUDGET

DEFINITIONS

A budget is a tool for planning, quantifying the plans and controlling costs.

- Flinker, 1984

A budget is a plan that uses numerical data to predict the activities of an organization over a period of time and it provides a mechanism for planning each unit’s needs and contributions.

- carruth, carruth & Noto, 2000

STEPS IN BUDGETARY PROCESS

BUDGET MONITORI

NG

BUDGET ESTIMATE

• Financial planning responsibilities need to be identified before budget preparation begins.

• The governing board, administrator, budget director, steering committee, and department heads are often involved in the budgetary process.

The governing body is responsible for the general planning function. It selects the budget steering committee, determines the budgetary objectives, and reviews and approves the master budget.

The administrator is responsible for the formulation and execution of the budget, by correlating the governing board’s goals with the guidelines for budget preparation and supervising the budget preparation.

The budget director is responsible for the budgeting procedures and reporting. He or she establishes a completion timetable, has forms prepared, and supervises data collection and budget preparation. The budget director serves as the chairperson of the steering committee, which approves the budget before it is submitted to the governing board.

Department heads prepare and review goals and objectives and prepare the budgets for their departments. Departmental budgets need to be prepared and coordinated. During this phase, units of service, staffing patterns, salary and non-salary expenses and revenues are forecasted so that preliminary rate setting can be done.