Running head: FINANCIAL PLAN 1

Running head: FINANCIAL PLAN
Financial Plan
Student’s Name
Professor’s Name
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Financial Plan
According to Grable, J. E., et al. (2008), both the financial plan and the projected
budgets help an organization to be successful both in the present and in the future
operations. Even though the two aspects go hand-in-hand, they are different in how they
influence organizational financial success. The main differences include the fact that the
budgets helps one the map out the key expenses that will be incurred in weeks or months
to come while financial plan helps on to plan for funding financial objectives and goals in
5 years and over. Creating a financial plan means make a long-term strategy for
achieving goals while making budget implies the management of money in day-to-day
business operations. In a financial plan, one track records of progress in quarterly and
semi-annually basis which in a budget, expenses and incomes are tracked in a weekly and
monthly basis.
Fiscal details
In a financial plan, there are fiscal details that are included. Stovall, J., & Maurer,
T. (2011) stated that these fiscal details indicate the flow of government expenditures, the
organizational debts and the sources of revenues. There are government expenditures that
will get into the organizations and private business in form of subsidies and other
incentives to the organization. This portion of the fiscal details is included in the financial
plan. The debts that the organization incurs through both external and internal borrowing
and also the used other means of financing its operations are also included in the financial
plan. It also includes the tax liability of the company to the tax authority. Finally, another
important financial detail is revenues that are collected from business operations. These
revenues are in form of sales returns and also profits that can be ploughed back to the
business and others are paid to the employees and shareholders in common and preferred
The assumptions use in the projected budget
In developing a projected budget, there are various assumptions that hold in a
order to develop a successful projected budget that will enable the organization to
manage it expenses and income in a fiscal year or within any other given period of time.
It is assumed that the increase in revenue, salaries and supply expenses per year
are 20%, 10% and 5 % respectively. It’s also assumed that travel, maintenance, contracts,
marketing, miscellaneous and salaries as a percentage of revenue are 1, 1, 4, 0.5, 2 and
75% respectively.
Other assumptions that will be important in making a projected budget include the
1. The real gross domestic product (GDP) growth rate for the projected period is
1.6% to 3.6% for 2015 and the trend rate for 2016 to 2018 is 4.5%.
2. The investment return is estimated to be 4.5% in 2015 and will be in the range of
3.7% to 6.2% per year thereafter.
3. The Land premium is estimated to be 2.5% of GDP for 2015-16 onwards.
4. The fiscal reserves balance as at 31 June 2018 previously estimated at $770.4
billion is now revised to $990.9 billion, representing about 30.9% of GDP for that
year. By 31 June 2019, the estimated fiscal reserves balance is estimated at $850.3
billion, representing 31.3% of GDP for that year.
Other assumptions include: gift revenues, the salary pool, overhead rates on
sponsored projects, the benefit rate, endowment distribution and capital requirement.
The elements of a projected budget
Swedroe, L. E., (2010) argued that there are elements that are included in a projected
budget that makes it a completed product that will positively influence the financial
decision making of an organization. By definition, budget elements are resources such as
capital, people and materials or any other thing that is required to complete a project,
program or a task planned to be undertaken. These elements can be categorized into two
sections which are the direct costs and F&A costs. The direct costs are the cost that can
be identified easily with a specific project. These direct costs are associated with the
1. Salaries and wages. The monthly or annual payments of all the employers or those
who are going to work on the projected are to be named and the overall total cost
of payments in form of salaries to be indicated.
2. Employee benefits. The composite employee benefit rates should be compiled for
every category of employee in the organization. The projected budget should
indicate whether the rates reflects the historical rates or are based on the published
composites for every individual employee.
3. Consultants. The names of all the consultants in different fields should be
indicated. Each pay rate by day and the period in which each will be paid must be
4. Equipment. All items that are purchased for a specific project or tasks should be
indicated along with the initial purchase costs, the projected cost of maintenance
and other associated activities to improve their performance.
5. Supplies. This is the major category of allowable expenses which include:
chemicals and survey forms. That estimated cost of every item type is indicated.
6. Travel costs. The information that should be known on this include, the purpose
and destination of every trip, the number of people who go to each trip, the mode
and cost of transportation and the rate and number of days per diem.
7. Patient medical care cost. Information that will be included in this element of a
projected budget include: information on the outpatients and inpatients, the
hospitals that provide care and the cost of providing health care services.
8. Renovations and Alternations. The processes necessary to install a new equipment
or covert an interior space necessary to adapt an existing facility should be
itemized and justified. For example, this include: contractual costs.
The other direct costs include the following: publication costs, subject fees,
alterations and renovations, computer usage rates, allowable telecommunication charges,
postage and allowable telephone etc.
The F&A costs are also referred to as overhead cost or the facilities and
administrative charges. These are costs that are incurred for joint or common objectives.
The F&A costs in a projected budget includes the following: library expenses, space,
payroll, utilities, building depreciation and accounting
The capital expenditure planning and contingency plans for unexpected
Booker, J., et al. (2006) stated that the capital expenditure planning and contingency
plans for unexpected events should be included in the financial plan for the organization.
Capital expenditures are heavy investments that are made by the public officials that help
to keep the economy in progress such as investing in long-term initiatives. Capital
expenditure planning therefore involves process of utilizing the procedures and
methodologies that a company uses in reviewing its operating needs and also evaluates its
long-term business requirements. On the other hand, a contingency plan is part of the risk
management plan which helps to prepare the organization to respond to unplanned and
unexpected events. A contingency plan is normally used as an alternative action plan if
the expected results fail to materialize. It is also a component of disaster recovery and
business continuity apart from risk management. Both capital expenditure planning and
contingency plan are implemented in a financial plan and budgets so as to acts buffers in
case of the occurrence of unexpected events.
Budget summary
The current business model of the organization is the Direct Sales model where
direct selling the primary route to market. Emergence of internet as been used as a
distribution channel and thus enabling the organization to avoid middlemen and sell
direct to final consumers of products. We rarely go against the way the organization
planned its finances in the past. We only make changes in the accounting methods when
necessary or advised depending on the kind of financial information that is present in a
given period.
Effects of internal resources and financial capabilities on the financial plan
Organization’s internal resources and financial capabilities positively affected the
financial plan. LLP, E. Y., et al. (2004), argued that these resources and financial
capabilities forms the internals sources of finances to fund the future plans of the
organization and other internal resources may be converted as finances to boost future
plans of the organization. The internal resources and financial capabilities also affect the
implementation of the financial plan due to the internal rigidities that are found in most
organizations and thus may delay the implementation of a financial plan.
Booker, J., CCH Canadian Limited., & Financial Advisors Association of Canada.
(2006). Financial planning fundamentals. Toronto: CCH Canadian Limited.
LLP, E. Y., Nissenbaum, M., & Raasch, B. J. (2004). Ernst & Young's Personal
Financial Planning Guide. Hoboken: John Wiley & Sons.
Grable, J. E., Klock, D. D., & Lytton, R. H. (2008). The case approach to financial
planning: Writing a financial plan. Cincinnati, Ohio: National Underwriter Co.
Stovall, J., & Maurer, T. (2011). The ultimate financial plan: Balancing your money and
life. Hoboken, N.J: Wiley.
Swedroe, L. E., Grogan, K., & Lim, T. (2010). Active versus Passive Management.
Hoboken: John Wiley & Sons.