The strategic plan of any business lays out the goals, guidelines, and procedures of achieving those goals. Therefore, budgets allow business owners to estimate finances that would be required to support the operational functions aimed at achieving those goals. In this regard, budgeting is part of the strategic process of planning. On the other hand, financial planning involves how money would be managed in meeting the needs of the business. In this case, both financial and strategic planning are intertwined in a cyclic manner ( Dudin & Frolova, 2015). Changes in the budget will, therefore, necessitate alterations of the strategic plan. In the same way, changes in the strategic planning will translate to modifying the budget in order to make finances available.
Financial planning is determining how much to spend, how to use it, as well as what to use it on. Therefore, functional departments in organizations have to know how much is budgeted before making strategic plans. For instance, the HR department would have to know how much is estimated to be incurred as salaries in order to exceed the estimations unless necessary. A low estimated amount might mean laying off some of the employees. In the same regard, availability of financial information from planning enables departments to determine how to suit their operations within the required budget. It will also guide their individual objectives. For instance, the marketing department would be able to know what aspects to improve on in order to increase the firm’s overall sales. Departments would also be capable of undertaking crucial activities such as training employees after knowing the level of financial support they have from the organization ( Finkler, Smith & Calabrese, 2019) . Most importantly, financial planning limits unnecessary spending within departmental operations that would contribute to an increase in total expenditures.
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References
Dudin, M., & Frolova, E. (2015). The balanced scorecard as a basis for strategic company management in the context of the world economy transformation.
Finkler, S. A., Smith, D. L., & Calabrese, T. D. (2019). Financial management for public, health, and not-for-profit organizations . CQ Press.
