Republic of the Philippines

RAMON MAGSAYSAY TECHNOLOGICAL UNIVERSITY

Advance Studies

Doctor of Education Major in Educational Management

FINANCIAL AND BUSINESS MANAGEMENT
Professor: Dr. Esmen M. Cabal

FINANCIAL PLANNING

Reporter: Wilma M. Brade

I. INTRODUCTION

One of the key challenges facing companies today is the ability to plan for the

future and to predict operating performance. An effective, timeous and accurate

budgeting, forecasting and financial planning process offers organizations an

opportunity to prepare for and be in a position to succeed in a rapidly changing

business environment. Companies that can update plans and forecasts quickly are in

a better position to take advantage of opportunities and respond to threats (Stretch,

2009: 90).

II. FORECASTING FINANCIAL NEED

A. What are you forecasting

1. Enough cash on hand

2. How much money to raise

3. Future earnings

B. Three main outputs of financial forecasting

1. Income statement

a. The increase in sales

b. The increase in costs

c. The increase in assets

d. The increase in debts

2. Balance sheet

3. Statement of external financing required (EFR)

C. Source of Funding

Financial Planning: Forecasting, Budgeting and Establishing Financial Control………Reported by: Wilma M. Brade Page 1
 1. Debt

2. Equity

D. Capital Structure and forecasting models

1. Internal Growth Rate

(addition to retained earnings)/(assets)

IGR= (plowback ration) (return on equity) (equity/assets)

2. Sustainable Growth Rate

Sustainable Growth Rate = (plowback ratio) (return on equity)

III. DEVELOPING BUDGETS

A. 5 Step Process of Budget Development

1. Assemble a budget team

2. Create a budget calendar

3. Prepare for budget process

4. Build the budget

5. Monitor the budget

IV. ESTABLISHING FINANCIAL CONTROL

A. Definition

Financial control measures are those measures that is put in place to ensure that

financial related assets or properties of an organisation are safeguarded, either from

externals or employees of an organisation from any threat whatsoever, whether by theft,

loss or misappropriation (intentional or otherwise).

They are developed to provide reasonable assurance to management that the

organisation business objectives will be achieved and risk prevented, or detected

and corrected.

B. Objectives of Internal Control System

1. Internal Accounting Control

Primarily directed to accounting operations such as the safeguarding of

assets and the reliability of financial records and financial reporting.

2. Operational Control

Financial Planning: Forecasting, Budgeting and Establishing Financial Control………Reported by: Wilma M. Brade Page 2
 Directed at day-to-day operations, functions and activities to ensure that the

operation is meeting the business objectives.

3. Administrative Control

Concerned with operational efficiency in a functional area and adherence to

management policies including operational controls.

Described as supporting the operational controls specifically concerned with

operating efficiency and adherence to organisational policy.

C. Features of an Internal Control System

1. Physical Control

2. Authorisation and Approval Control

3. Personnel Control

4. Arithmetical/Accounting Control

5. Management Control

6. Organizational Control

7. Segregation of Duties

8. Supervision Control

D. Categories of Control Measures

1. Preventive

2. Detective

3. Corrective

CLASSIFICATIO FUNCTION EXAMPLES

N
Detect problems before they Employ only qualified staff

arise Segregate duties

Monitor both operation and Control access to physical

Preventive input facilities

Attempt to predict potential Use well designed

problems before they occur document

and make adjustments

Use controls that detect and Duplicate checking of

report the occurrence of an calculations

Detective error, omission or malicious Past due account reports

act Internal audit functions

Financial Planning: Forecasting, Budgeting and Establishing Financial Control………Reported by: Wilma M. Brade Page 3
 Minimize the impact of Contingency planning

threat Backup procedures

Make remedy to the

problems discovered by

Corrective detective control

Identify the cause of a

problem

Correct errors arising from a

problem

E. Areas where financial control could be applied

1. Bank account

2. Sales

3. Purchase

4. Cash and cheques

5. Fixed assets

6. Payroll-salaries and wages

7. Stock

V. CONCLUSION

According to Ernst & Young (2011: 4), the following potential benefits

are derived from a formal planning, budgeting and forecasting process: enhanced

performance management capabilities, increased visibility into and across

operations, more objective and data driven decision-making and increased

responsiveness to external factors.

VI. REFERENCES

1. Hilda Polanco: Five Step-Guide to Budget Development, Fiscal Strength for

Nonprofits, 2015

2. Jokomba Habeeb D., Financial Control Measures pdf

3. KPMG, 2009. Planning, budgeting and forecasting [pdf] Available at:

<http://www.kpmg.com > KPMG, 2010. Forecasting for sustainability,

Budgeting for better performance, Trends in forecasting – The science behind

the crystal ball. Finance function insights, 1(5), 2-7

Financial Planning: Forecasting, Budgeting and Establishing Financial Control………Reported by: Wilma M. Brade Page 4