Planning is the specific process of setting goals and developing ways to reach them. The success or failure of any enterprise or project depends mainly on proper planning. It is rightly said that failing to plan is planning to fail. Financial planning is an integral part of the job of financial planners. It is needed both in terms of long-term and short-term financing. Financial planning in the long-term is concerned with the design of the pattern of financing, and in the short-term it is concerned with forecasting of cash.

Financial planning is the application of planning to the various aspects of the finance function. Basically it involves the formulation of the financial plan which states the quantum of finance required, the pattern of financing and the policies to be pursued for the administration of the financial plan. A business enterprise requires short-term and long-term capital. The total capital required by a concern is termed as capitalization. The short-term capital or the working capital is the capital required to meet the day-to-day obligations or the operating expenses. The long-term capital is required to acquire the fixed assets. Generally, on a conservative ground, a portion of the working capital is also met out of long-term capital.

The capital so required may be collected from different sources. A substantial share is raised from internally generated funds. The remaining part should be raised from outside sources, such as the issue of shares and debentures, or the raising of loans. The pattern of financing is known as capital structure. It should be designed in such a way as to obtain the required amount at the lowest possible cost. Once the required amount is raised, then it is the job of financial planners to see that the funds are allocated in the best possible way to obtain the maximum benefits. Implementing proper control systems can ensure the efficient use of the funds.

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