6.3.3 Enterprise Financial Planning

Financial planning is the process of determining, justifying and establishing the financial performance of an enterprise for a certain future period of time . Depending on the duration of this period and on the degree of accuracy and integration of the planned indicators, strategic ^* , tactical ^* and operational ^* financial planning are distinguished.

The purpose of strategic financial planning is to determine the prospects for its development over a sufficiently long (several years) period, which should provide the desired and necessary level of overall financial performance. The peculiarity of financial strategic planning is that in the conditions of a market economy it is both the starting point and the final point of the overall planning process of an enterprise. In this process, there are three components: production, marketing and financial planning, the interaction of which is as follows:

• the main tasks of production and marketing strategic planning are solved, appropriate strategies and indicators are defined (the mission ^{* of an} enterprise, its goals, objectives and evaluations, including financial ones, coordinated production and market development);
• regardless of the results of production and marketing strategic planning, the necessary financial results of the development of the enterprise in a strategic perspective are determined (evaluated);
• The obtained estimates are compared and, if they diverge, the estimates are adjusted (adjusted).

In the coordination process, priority is always given to those estimates that financial strategic planning provides: if these estimates are lower than production and marketing, then they increase accordingly, if higher, the requirements for production and marketing development of the enterprise change. This provision is determined by the fact that the main goal of any enterprise is to obtain the highest possible financial effect (. § 5.3.1), and the ways to achieve it (production and marketing) are secondary. From the standpoint of the owners of the enterprise, this means that they are primarily interested in what financial results their investments give, and only with its satisfactory value - the technology of activity and the markets of the enterprise.

The most important indicator for the owners of the financial efficiency of investments is the profitability of the company's own funds (DSS):

DSS = PE / SS 100%,

where state of emergency - the company's net profit for the period, rub.,
SS - the average for the period the size of own funds of the enterprise, RUB.

In strategic financial planning, this indicator is defined as the result of a forecast of the average return on investment in the national economy or in the industries in which the enterprise operates (CI). The general condition of acceptability for owners of investment in a particular enterprise is that in each year of the strategic period, or at least for the period as a whole, the DSS should not be lower than the CI. For example, indicators such as the Central Bank’s refinancing rate, the average interest rate on time deposits of commercial banks, the average yield on various types of securities (in a stable economy, as a rule - state), and others can be chosen as CIs. Essentially, a CI is a measure of the return on an owner’s alternative investment.

DSS and CI are indicators of financial efficiency, which, to ensure the objectivity of strategic planning, must be supplemented with indicators of financial effect - net profit of owners, respectively, from investments in production and business activities (CHPD) of an enterprise and in an alternative area of ​​investment (CPAI). The first indicator is determined on the basis of what the assets of the enterprise (A) will be and the profitability of the activities (P) of the enterprise in each (i-th) year of the strategic period:

CHPPHDi = A _i P _i H _i / 100 100 ,

where H _i is the volume of tax exemptions and payments from profits in the i-th year.

Determining the value of NPPI is based on the assumption that the owners will return to themselves the investments already made in the enterprises (for example, by selling their shares or selling assets), receiving income D, adding to them investments planned for the future (and _P ) and investing These funds are in an alternative area:

PPA And _i = (D + And _Pi ) D & _i H _i / 100 100

The condition of eligibility for the financial effect of the strategic production and marketing plan is at least the equality of CHPHD and ChPAI, otherwise their correction is necessary. Providing the necessary overall financial results (financial efficiency and financial effect), the production and marketing strategic plan is the basis of the strategic financial plan, which includes the following indicators determined by the years of the strategic period for the enterprise as a whole and for individual areas of production and business activities:

1. The volume of production and economic activity in physical and monetary terms.
2. Profitability of the enterprise.
3. Capital expenditures.
4. Current expenses.
5. The need for financial resources.
6. Sources to cover the need for financial resources, including:
   • share capital (contributions of owners);
   • undestributed profits;
   • cash loans;
   • loans;
   • commercial loan;
   • other (indicator balancing the need for financial resources and sources of its coverage, which is specified in the course of tactical financial planning).
7. Tax exemptions.
8. Net profit.
9. Own funds.
10. Return on equity.

An important process accompanying the construction of a strategic financial plan is the development of a financing strategy for an enterprise, the main types of which, depending on the ratio of resources attracted by various methods, are the strategy of relying on own funds and the strategy of relying on borrowed funds.

The first kind of strategy means that an enterprise builds up its financial resources mainly at the expense of share capital (contributions from owners) and the share of profits allocated for the development of an enterprise. The second type consists in the priority increase in the volume of cash loans, the issuance by the enterprise of its own debt obligations and the conscious increase in payables.

The general criterion for choosing a financing strategy is the amount of expenses for the implementation of one or another of its types: shareholder dividends, interest on a loan, income on bonds and promissory notes, increase in supply prices due to deferred payments, organizational costs of issuing securities and others. The minimum cost per unit of funds raised means the preference of a certain type or separate direction of the strategy.

At the same time, other factors should be taken into account, for example:

• the dispersion of ownership and the complication of the problems of enterprise management as a possible consequence of increasing the share capital;
• decrease in the interest of potential shareholders as a result of increased profits for development and reduction of dividends;
• an increase in the interest of potential shareholders in the same case with an increase in the market prices of the company's securities;
• creditors' reaction to changes in the financial structure of an enterprise’s capital
• restrictions on the size of banks loans issued to one borrower;
• the reaction of the company's partners to the growth of accounts payable and others.

A distinctive feature of the strategic financial plan is that it is not so much a normative planned task, as a general guideline for the financial development of an enterprise: the plan’s indicators are of an obvious evaluative nature. In this regard, this plan should, to a certain extent (but not fundamentally), be periodically adjusted depending on changes in external conditions and on the results of the enterprise’s activities.

The purpose of tactical financial planning is to provide monetary resources for the production and business activities of an enterprise and to achieve indicators of a strategic plan during the year. To achieve this goal it is necessary to solve three interrelated tasks:

1. enterprise growth planning;
2. cash flow planning;
3. building a planned balance sheet.

1) Planning the growth of the enterprise, i.e., the annual increase in production and business activity, expressed as a percentage of the previous year, is a link between strategic and tactical financial planning itself. Solving ^* this particular task is a tool for adjusting the strategic financial plan in accordance with the actual results achieved by the beginning of the year and the situation that has developed on this moment in the financial market.

Enterprise growth planning is carried out in two stages.

Stage I. Growth planning with a stable state of the enterprise, i.e., while maintaining in the planned year at the level of the basic indicators of the financial efficiency of the enterprise, the rate of profit allocated for development, increasing its own funds only from this source and maintaining the financial capital structure. The calculation of growth at this stage is carried out in the following sequence.
Calculate the financial performance of the company for the last (base) year in this composition:

1. 1. capital intensity of sales - the cost of capital of the enterprise per unit of production and economic activity (KP):

KP = A / BB,

where a is the average annual value of the assets of the company, RUB;
BB - gross revenue, rub .;

1. 1. return on sales - net profit per unit of production and economic activity (RP):

RP = PE / BB,

where the rate of capitalization of profits - the share of net profit allocated to the development of the enterprise (NC):

NK = PE - PP / PE,

where Pn is the profit allocated for consumption, rub .;

1. 1. financial capital structure:

FGC = ZS / SS,

where CS is the average annual value of borrowed funds of the enterprise.

Calculate the growth of the enterprise in its steady state (Rus):

Rus = ([NK RP (1 + FGC)] / [KP - NK RP (1 + FGC)]) 100.

Calculate the volume of production and economic activity in the planned year:

VVpl = BB Rus / 100.

If the calculated value meets or exceeds the requirements of the strategic plan, then the financial growth planning ends there. If such a match is not achieved, then proceed to the next step.

Stage II. Growth planning when the state of the enterprise changes, which may concern any of the above-mentioned indicators, but the change in the value of the company's own funds, the rate of capitalization of profits and the efficiency of using assets is considered to be decisive. Based on this, growth planning is carried out in the following order.

1. 1. Determine the possible value of own funds, taking into account the attraction of additional capital (for example, a new issue of shares) (SS ").

   2. Determine the amount of profit that you want to allocate for consumption (PP ").

   3. Determine a possible increase in the efficiency of use of assets in the form of reduced capital intensity of sales (KP ").

   4. Calculate the growth of the enterprise under these conditions (Riu):

Riu = ([(SS "- Pn") (1 + FGC) (1 / kp ") (1 / BB)] / [1 -RP (1 + FGC) (1 / KP ")]) 100.

1. 1. Calculate the planned volume of production and economic activity:

VVpl = BB Riu / 100

This indicator gives an idea of ​​how much production and business activity the company will provide in the planning period, if it limits the use of domestic financial resources - with a constant sales profitability and financial capital structure. If an enterprise has opportunities to influence these indicators (which basically do not relate to financial activity itself) and the calculated growth rate does not meet the requirements of the strategic plan, then they should be used and the new RP and FGC values ​​should be included in the growth calculation. If such actions do not ensure the achievement of strategic indicators, this may serve as a basis for adjusting the strategic plan.

2) Planning the cash flow of the company should provide a clear and specific idea of ​​what amounts of cash flow and at the expense of which sources should be provided by the company in the planning period and what expenses should be incurred, as well as determine the timing and form of income and expenses. The cash flow plan solves the following tasks:

• creates the basis for operational financial planning and regulation by allocating semi-annual, quarterly and monthly financial plans;

• allows you to share the costs and results of individual areas of the enterprise, highlighting their share in cash flows;

• allows you to build a planned balance sheet and a planned report on financial results at the end of the year using data on the planned growth of the enterprise.

Structurally, the overall cash flow plan is a system of private plans, which includes:

• plans for the company's cash flows for the year, semester, quarter, and month;

• plans for cash flows in certain areas of the enterprise (for example, its product divisions);

• plans for individual cash flows of the enterprise as a whole and each product division.

In expanded form, this system is very voluminous and may include several dozens of planning documents. The specific composition of the system at each enterprise is determined by the requirements for its integration, the capabilities of the financial and economic service and the significance for the enterprise of certain types of plans.
The cash flow plan is built in the context of two groups of indicators - cash receipts and cash expenses, the approximate composition of which is as follows:

Cash receipts:

• proceeds from the sale of goods and services of the enterprise;
• repayment of receivables;
• receipts from the issue of shares of the company (contributions from owners);
• cash loans;
• proceeds from the issuance of debt obligations of the enterprise;
• income from income assets (interest payments and income from sales);
• miscellaneous income (income from the sale of surplus production assets and non-sales results).

Cash expenses:

• the acquisition of the means of production (with the allocation of fixed and revolving funds);
• salary ^* ;
• repayment of payables;
• interest payments on loans;
• loan repayment;
• payment of interest on debt obligations;
• debt repayment;
• payment of current taxes;
• tax debt repayment;
• acquisition of earning assets;
• payments from profits to owners and staff of the enterprise (including indirect);
• other expenses.

Each of these indicators can be an independent object of planning and determined during the development of a separate plan. The most common in this regard are, for example, a plan for the cost of production, a tax payment plan, a plan for repayment of loans and some others.
The principal requirement for the cash flow plan is to ensure its balance, i.e., the exact correspondence of cash receipts and expenses both as a whole and for individual intra-annual periods.

3) Planning a company's balance sheet, which is based on data from the company's growth plan and cash flow plan, allows to evaluate the planned results of the company's development for the year in the form of calculated indicators of its financial condition and bring the results of strategic and tactical financial planning into a single system.
The planned balance sheet is developed in an enlarged form and in this sense differs from a reporting accounting document, while maintaining its overall structure.
The approximate composition of the planned balance of the following indicators:

Assets:

Fixed assets:

• fixed assets;
• long-term financial investments;
• Other noncurrent assets.

Current assets:

• working capital assets;
• finished products;
• receivables;
• short-term financial investments;
• cash;
• Other current assets.

Liability:

Capital and reserves:

• equity;
• undestributed profits;
• reserves;
• accumulation.

Long-term liabilities:

• long-term borrowing;
• other long-term liabilities.

Short-term liabilities:

• short-term debt;
• accounts payable;
• dividend payments;
• other short-term liabilities.

Almost all indicators of the planned balance, built on this form, follow from the results of tactical production and financial planning, and, if these results are agreed, the construction of this document is basically a technical task. In practice, such coordination, especially in the period of development and implementation of an integrated system of intra-company planning, is difficult to achieve and the task of building a planned balance arises as a tool for combining common planning results.
To do this, use the autonomous (independent of most indicators of other plans) method, the essence of which is as follows:

1. In the course of production and marketing planning, the planned gross revenue of an enterprise is set approximately.

2. They put forward the assumption that most of the indicators that form the balance, directly proportional to changes depending on the value of gross proceeds. These elements include fixed and current assets, accounts receivable and payable, cash, short-term bank and tax debt.

3. According to last year, determine the ratio of the relevant articles of the balance sheet and gross revenue.

4. Based on the planned revenue, determine the planned values ​​of these balance sheet items.

5. The values ​​of the remaining balance sheet items are determined directly from the cash flow plan.

6. Determine the resulting imbalance, i.e., the difference between the value of assets and liabilities. If this value is positive, then the company needs additional funding; if it is negative, a reduction in capital or the search for effective forms of using surplus is necessary.

Operational financial planningis the current adjustment of the tactical financial plan, mainly - the cash flow plan, depending on short-term changes in the conditions of the enterprise. The main task here is to regulate cash receipts and expenses in order to maximize their performance to the requirements of the tactical plan. The main tool of operational financial planning is to determine the most effective ways of maneuvering those financial resources that are currently at the company's disposal, including non-monetary forms of payment, such as barter, netting, and assignment of debt. The methodology of such work cannot be formalized in its essence and is a combination of experience, knowledge and intuition of a financial manager.