Symptoms of an Overheating Economy
The IMF recently asked the Philippines to take measures to rein in its overheating economy. This is not the first time the IMF has made such a statement. In fact, IMF commonly asks countries to take measures to prevent “overheating.” However, the problem is that there is no standard definition which defines the phenomenon of […]
Why Donald Trump Will be able to Stop Outsourcing ?
Donald Trump has positioned himself to be a populist leader. Although in reality, he is an opportunist leader. He has promised his voters that he will stop outsourcing and protect their jobs from cheap foreign labor. Most political pundits did not believe Trump will be able to achieve anything of that sort. After all, even […]
Supply Chains as Sources of Competitive Advantage
Optimizing the Supply Chains A supply chain is the network of relationships between the upstream and downstream activities with all stakeholders who are involved in this chain of relationships. To take an example, if a particular good or service has to be delivered to the customer, there are raw materials that are needed for the […]
Information Technology and Business Alignment: Why it is Important
Introduction: What is IT Business Alignment and Why it is Important The saying about the Blind Men and the Elephant in which three blind men touch the Elephant and state different things without knowing that it is an Elephant, firms and organizations must ensure that their IT and business strategies are complementary and supplementary to […]
Apple’s Trillion Dollar Achievement and Also Some Forthcoming Challenges
Apple Inc. is the largest company in the world today. In Aug 2018, the company became the first in the world to reach a trillion dollar valuation! This meant Apple was ahead of its competition by at least $150 billion. Other companies such as Alphabet have a market capitalization close to $850 billion. The reactions […]
Financial analysis and planning are one of the fundamental activities and responsibility for the finance department. Financial analysis and planning help an organization in achieving strategic tasks and objective within available resources.
The key responsibility of financial analysis and planning team is facilitate management in formulating short and long-term objectives, carrying out cost-benefit analysis and ensuring targets are met through periodic reviews.
Another responsibility is to ensure that management’s actions create profitability for organization by providing relevant financial information.
Financial analysis and planning are essential divided into four parts forecasting, budgeting, reporting and analysis.
Information technology and systems have made a big impact on financial analysis and planning. The advent of databases and modern analytics tool have smoothen the whole process.
The first major step in management planning is formulating future sales strategy and assessing the financial requirements to execute that plan.
Organization needs to analyze the current and future internal business scenario as well as external developments, which impacting the business.
Forecasting tools such as Hyperion Planning Tool is apt in helping organization achieve this task.
Forecasting module of the tool provides information happenings of previous financial years, broken down various cost elements. This provides organization with a trend with past results.
The second major step is budgeting for management objectives. After analyzing the past trends, organizations are able to asses’ trend of expense within various cost elements.
The next step is to expense all the cost account on a monthly basis. This will bring about financial requirements of organization for given financial year.
For example, Hyperion Planning Tool’s budgeting module facilitates organizations to enter financial information on a monthly basis in all relevant cost accounts. It creates a scenario of financial requirement for the given year.
The third major step is reporting financial information at every end of the month. Essentially reporting can be defined as providing financial information for decision making at a periodic interval of time.
Financial reporting could be for internal stakeholders' as well external stakeholders. The internal stakeholders could be the business owners and the management team. The external stakeholders could be investors and financial institution.
For example, Financial Data Mart kind of system pulls in information from different payroll, accounting and payables/receivable modules to provide accurate monthly financial information.
The fourth major step in financial analysis and planning is the analysis part. When there is over spend scenario, we need to analyze what is causing overspend, which factors are driving over spend.
A further analysis needs to be done whether factors driving over spend can be controlled or not.
Financial analysis requires studying of liquidity, profitability and long-term sustainability. Financial ratios play an important role in financial analysis.
Financial ratio analysis module helps in creating analysis about financial performance of company and compare with organization within the same industry.
Module has templates for current ratio, production costs, cash conversion cycle, etc.
Financial analysis and planning function comes within the purview of the chief financial officer.
Hence it is important to develop financial systems, which support executive decision also.
Your email address will not be published. Required fields are marked *
Communication Systems and Groupware – Information System Concepts that Apply in All Functional Areas of Business
February 12, 2025
