FINANCIAL PALNNING AND CONTROL A KEY TO MANAGEMENT

1.0 INTRODUCTION In a competitive world where the key factors are costs, price turnover and profit, planning and control enable every individual to have a sound appreciation of the financial implication of his plane and actions, and this financial plan and control can be used by any type and size of organization. As a tool of management, it can increase the efficiency of the organization as a whole since all the departments are involved. The efficiency and effectiveness of any organization depend on a number of factors which may be categorized as clarify of purpose, managements planning, control and communication. There is need to have a knowledge of the objectives of the organization otherwise it will not be possible to identify goals and set target for their achievement. According to Ekweueme P. “Finance is the art and science of managing money, it is concerned with the process, institutions, markets and instrument involved in transfer of money among and between individuals business and government. According to Orji J. “finance function deals with raising of fund and investing them in assets. He went further to say that financial management is the management activity that is concerned with the planning and controlling of the firms financial resource. The duty of the financial manager is to implement the acquisition, allocation and management of the resources. Finance therefore spreads into all segments of the firm’s activities thus its function must be understood by all segments of a firms activities and the function must be understood by all the managers in the firm. Having known the future financial needs of a firm and its financial policies, the question then is how are these finance or fund raised? In taking this decision, it required the knowledge of the financial markets and how to make sound investment decision and to stimulate efficient operations in the organization. This needed fund are sourced through internal and external source but before looking outside a firm for fund, the possibility of providing such funds internally should be examined. This source is mostly used for the firms expansion and should not be overlooked when planning finance. They are generated from the operations of the firm and is mostly made up of undistributed profits, depreciation provision tax provision and reduction in current assets. The external sources on the other hand are made up of two main types namely short-term funds and long-term funds. The short-term fund consist of trade credit, bank overdraft, bank loans, promissory notes etc. the long-term, refer to funds obtained either from loans with maturity dated several years in the future or from the owners of the business. This long-term fund is made up of equity fund and debt. Equity fund represent the total interest of the owners of the business in the form of original share contribution plus subsequent addition either by way of additional investment or by ploughing back profit or reserves into the business. Debts are the long-term debt obligations of the business and it is usually made up of secured and unsecured debentures and bonds. The main sources of these long-term funds are the banks and the capital markets. Financial planning and control therefore is said to be the name given to a system which is being used to increase overall management efficiency. It is concerned with planning for allocation of resources, monitoring the usage of these resources to assist in achieving the objectives of effectiveness and efficiency in both large and small scale organization. The need for financial planning therefore arises because financial resources are limited and costly and even where the resources are available, the areas into which they could be applied profitable are diverse. Planning and control act as a device that enables management to anticipate change and adapt to it. No business exists without this two concept and success in business is proportionate to its planning and the skill with which it is controlled. STATEMENT OF PROBLEM In spite of all the write up concerning the raising of fund and their utilization, most organization however take the sledge hammer to crack nuts while trying to achieve their goals. This study will therefore try to answer such question like: - What problems affect the implementation of financial planning and control system in a company? - Do you think the fund manager of Nigeria Breweries exercise prudence in their work? If not does it affect planning and control in the company. - What kind of control should be applied and how effective is this control? LITERATURE REVIEW Private and public organizations have experienced significant changes in recent years in both size and complexity. As a consequence, the management process has become more difficult, requiring greater skills in planning, analysis, and control--skills aimed at guiding the future course of organizations faced with accelerating rates of evolution in technical, social, political, and economic forces. This book examines a major segment of these skills: the theory and practice of financial planning and management in public organizations and, in particular in local government. The purpose of this initial chapter is to provide a broad overview of the components of financial management, building on the three basic cycles of cash management, financial planning, and management control (see Exhibit 1). In theory, the objectives of financial planning and management are quite simple--they are difficult only in practice. In theory, one merely has to decide what is wanted (specify goals and objectives), measure these wants (quantify the benefits sought), and then apply the means available to achieve the greatest possible value of the identified wants (maximize benefits). The means are the resources of complex organizations. Therefore, the primary objective of financial planning and management is to maximize benefits for any given set of resource inputs. The first step to financial planning is assessing risks to your income. What is the next step? The obvious answer is managing expenses. Seeking financial control always precedes saving, but this key step is almost always missing from financial planning exercises. Controlling or managing finances implies taking charge of the way you allocate money to competing needs. Money is a fixed resource with multiple uses, and when it comes to financial decisions, opportunity costs can make a big difference. Here are four key elements you should consider while seeking financial control. Financial plans can be a critical tool for any company. They help link a company’s daily operations to its mission and both its short- and long-term goals. These plans help management define the steps needed to attain benchmarks that will enable it to reach those goals. At the same time, financial plans provide investors with a roadmap for how companies will grow and mature. Financial plans can be motivating, a mechanism for rallying employees to hit targets and benchmarks. They also can be sobering, revealing if a goal is not attainable or providing insight into what adjustments companies have to make—cost-cutting, divestment, and so forth—to reach specified targets. While large businesses need financial plans to inform management and investors, these plans are not solely for large companies. Private enterprises on the cusp of going public need financial plans to provide investors with visibility of both their financial rigor and goals. Even small companies—family businesses as well as the so-called mom-and-pop operators—can benefit from having a structured, measured approach to running and growing their businesses. Some companies—such as GE—have more than one financial plan. Some are long-term growth playbooks, complete with specific tollgates, where managers can measure if and when a business unit will hit a specified target. Other financial plans are shorter term, such as GE’s annual operating plan. Without such plans, any business would not be able to measure accurately whether they have failed or succeeded in running their business—or whether venturing into a new area was productive or destructive. The result of a financial plan may mandate that a company change its capital structure. For example, a financial plan might underscore that a company needs to reduce its debt and raise equity, or take on more debt to fuel expansion. It also will provide management with guidance on whether it needs to generate more cash. In addition, a financial plan will provide insight into whether a company will be compliant with its debt agreements. Financial plans start from the ground up. Management begins the planning process by setting goals. The next step involves gathering insights and information from all areas of the business to understand its competitive position in its particular market segment. Management then can focus on internal and external factors, enabling it to create a base from which to forecast revenue and profits. The results will enable management to create a budget as well as to think strategically about matters from cutting costs to penetrating new markets. Setting goals The financial planning process typically kicks off with a company establishing its goals. These goals may be numeric—such as profit, return on investment, GE’s annual strategic and financial planning process takes both a long-term and a short-term view in setting direction, including periodic checkpoints to assess progress against targets viewpoint