Financial Plan for the Organization

Any company, businesses or organization need funds to finance everything needed and to
continue developing the organization there are a lot of options to borrow or finance and organization.
There are two types of financing short term and long term financing.

Short term Financing

To borrow money through short term financing there are some ways just like bank loans,
commercial paper, unsecured and secured bank loans. The benefit of short term financing is that it
provides shorter maturities ranging from 1-5 years. In an organization common problems such as
temporary deficit in money happens for example accounts receivable needs to be financed immediately
and short term borrowing/ financing is one of the solution because it is simple to borrow and the money
will be received quickly by the organization. Paying short term debt is a lot easier and funds are used
more for working capital. Here are some other types of short term financing.

 Trade Credit

It is a loan extended by the suppliers where you buy now pay later. This is very convenient and
commonly used for short term financing. Advantage of this is minimal cash outlay or discount for fast
payment. Since through trade credit you have your inventory or keep the shelves of your business
stocked and if you make regular sales you are able to pay seller and at the same time gain net profit.
Most of the sellers give discount if you pay early and this can help to maintain healthy cash flow. The
disadvantage is that there are penalties if you pay them late which can lead also to loss of trade credit
privileges that’s why you need to be a reliable and responsible payer.

 Short Term loans

It is considered a valuable option especially for businesses or organization that is just starting. It
is a borrowed capital amount and usually the interest paid according to the said due date, which mostly
lasted for a year. The advantage of it is quick funding time which is easy to acquire because
requirements for this loan is easy to meet. But the disadvantage for this is you can only borrow small
amounts and sometimes it is hard to pay because of shorter time to pay-off debt.

 Business Line of Credit

This helps the business to meet short term capital needs it is just like a business credit card
interest begins to accumulate once you draw funds and the amount you pay less the interest will be
available again to be borrowed as you pay down your balance.

 Invoice Discounting

This is same with factoring which allows business owners to leverage the value of their sales
ledger. When an invoice was send out to a customer the proportion of the total amount available will
become the source of working capital for a month.

 Factoring

It is a transaction when accounts receivable sold to a third party (factor) at a discount to

immediately receive cash.
Long term Financing

In long term financing there are some ways to source fund, there are a lot of companies prefer
long term financing, aside from longer maturities which often allowed for delayed, limitation or no
amortization. If the organization needs to develop or wanted to achieve future plans long term financing
is the most ideal because it is attractive for big investments that take a long time to pay off. Any
organization has its own goals like expansion or wanting for the organization to be known.

 Equity Capital

It is a fund paid into a business by investors in exchange for stocks which also makes an investor
to have some degree of control in a business.

 Preference Capital

This is a portion of capital raised through the issue of preference share. There is no legal
obligation in the firm to pay dividend to the shareholders.

 Debentures

Also known as bond, companies used debentures in order to borrow money from public and be
paid at future date. One of its advantage is fixed income at lesser risk that’s why investors preferred it.

 Term Loans

It is a loan from bank with fixed amount and fixed repayment schedule. Commonly used to
purchase equipment or having a new building.

 Retained Earnings

It is the amount of net income less the dividends paid to its shareholders. The surplus money
can be utilized to sustain the growth of the business.

Financial Plan

Visualizing everything about your organization either financial or future plan are important to
pinpoint things and monitor for best timing.

1. Have a Strategic Plan

Before creating a financial plan you need to know first the strategic plan
because it will indicate the plans that the organization wants to achieve in the future.
Through that you can make assumptions and projections about the expenses or budget
needed to make those plans into reality. In the organization in strategic plan there are
some expansions or production of new product that is happening and the important
part is you will take that plan into next step of becoming into reality by planning
financial needs of that future plan. Making the organization to be known more to the
people to attract more investors. Boosting the marketing of the organization would be
very helpful also.
2. Develop Financial Projections
Create financial projection on monthly basis, focus on details needed just like
supplies, labour and sales. Realistic projection is needed, there are some instances
where the income of the company/ organization will be positive or negative. It will be
helpful to anticipate the income. If I’m going to choose a source of financing I prefer
long term financing, since this financial plan focuses more on how to grow and develop
more the organization. I need large amount of money to finance the needs of this
organization. In long term financing it is much better to choose Equity Capital because of
the investors doesn’t expect immediate return on their investment and they focus more
on future outcome. It has a lower risk for bankruptcy also.

3. Complete Financial Plan

Use those projections to know your financing needs. Seek for advice to other
financial partners and discuss the plan and possibilities that might happen. This will
became an assurance for the organization that the financial management is solid and
well managed.
4. Plan for Contingencies or Possible Financial Loss
No one wants to think about negative things that might happened in an
organization but being realistic is much important. Having plans if finances suddenly
deteriorated is important to know some emergency source of money to avoid bigger
loss or problem. If this thing happened in the organization there are a lot of options to
immediately have a cash and there are many short term financing that could help to
cover up some financial problems. Choosing short term loans would be very useful.
5. Always Monitor the Plan
Every year there are changes that is happening and comparing projection to the
present situation is important to know what to adjust and to spot problems that might
occur. Achieving a goal doesn’t happened for just a year it will took a lot of years in
order to achieve it monitoring the plan will keep you right on track.