1. Lecture was elaborated with the help of grant project of Ministry of Education, Youth and Sports, FRVŠ n „Innovation of Subject Financing of Building Order“
Financial Planning

2. Financial Planning and Budgets of the Company
Policy of the company forms strategic aims of the company and the planning specifies the tactics, how to achieve them
Assessment of the plan of the company in the frame of specific aim expresses natural volume of production process
Budgeting follows the specific plan and transforms its natural volume into financial form
System of budgets in the company:
Financial budgeting of management (financial/company budget)
Includes budgetary profit/loss report, budgetary balance sheet and budget of cash flows
Budget of particular accounting centers – departments (budget of accounting centre)
Includes budget of revenues and budget of costs, partial budgets of costs (e.g. the budget of minimal overhead costs)
Budget of particular orders (price budget – offer budget)
Is created by price items of materials and works necessary for specific order
Financing of Building Order

3. Financing of Building Order
Financial Planning
Decision making about the way of financing (obtaining of capital), about investing of capital and financial economy (e.g. the assurance of liquidity of the company)
Focused on the prediction of possible financial situations of the company
Phases of financial planning:
Planning of objectives
Objectives of the whole company and its parts
Planning of operations
Operations necessary for achieving of defined objectives
Financing of Building Order

4. Objectives of the Company, Principles of Financial Plan
General objective of the company
Assurance of its sustainable existence with achieving of good economic results
Maximization of profit
Maximization of the market value of the company
The product of the financial planning the financial plan
Financial plan:
Simplified model of future situations and flows in the financial system of the company
It defines the type, amount and moment of operations leading to filling of the model
It creates the set of operations for decision making, whose impacts are expected in future
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5. Structure and the Form of Financial Plan
The financial plan is realized for the long-time horizon (operations defined by financial plan bring results during 3 – 5 years)
The part of the long-term financial plan is created by detailed annual financial plan
Structure of the financial plan corresponds with the structure and the form of financial (accounting) statements (balance sheet, profit/lost account and cash-flow report)
Financial plan in the form of annual accounting statements is valuated by tools of financial analysis
Financial plan is completed by three planning documents:
Building orders prediction
Budget of the investment costs (expenditures)
Budget of external financing
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6. Long-term Financial Planning
Main objective of the long-term financial planning is the creation of the profit
The profit creation from the long-term aspect is determined by:
The realization of long-term operations in the investment and technical area
The financial planning must be based on the financial analysis of previous periods respecting:
External conditions (development of demand, prices, interest rates, tax rates)
Internal influences (analyses of differences between plan and reality, development of financial indexes in last years)
The main criteria for planning it is the plan of revenues
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7. Financing of Building Order
Plan of Revenues
Assurance of building orders is the main supposition for keeping of certain number of employees and good financial situation of the company
The plan of returns is based on the prediction of market conditions and on the plan of orders
The subject of the prediction it is the total amount of goods (in financial of measure units) and market prices (dependence on development of consumption)
Planned returns are the basic inputs into the financial plan
Financing of Building Order

8. Methods for Financial Plan Creation
Method of the percentage rate on returns
Suitable method for creation of the frame of the financial plan
Based on the plan of returns and expected dependence of some kind of costs (material, wages) or amount property (long-term tangible property, working capital) on returns
It is created the profit/lost report and then the planned balance sheet and the plan of cash-flows
This frame of the financial plan is next completed by planned investment projects for possibility to analyze the impact of particular investment projects on the total company's economy
This financial plan is only the proposal, which it is necessary in next phase of its preparation to optimize
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9. Short-term Financial Planning
Short-term financial plan arises by specification of intentions for specific year
It follows the expected situation in the current year, it is based on the long-term financial plan
External conditions it is possible to predict only for short time, for the one year prediction the risk of mistake is quite low
Annual financial planning it is possible to do in following steps:
Creation of planned profit/lost account (based on the plan of returns, costs and profit)
Creation of the plan of cash-flows (follows P/L account in current activity, budget of investment expenditures in the investment activity, and plan of financing in the financial activity)
Creation of planned balance sheet (reacts on the increasing and decreasing of property and sources)
The fulfilling of the plan (for month or for quarter) is checked with the help of information from the accounting system
Financing of Building Order

10. Plan of Revenues, Costs and Profit
The objective of the annual financial plan is the reliable estimation of returns
The development of returns is influenced by changes in structure of building orders, changes of prices, expected development of demand etc.
For the planning of returns it is necessary to define changes that will be taken into account
For the planning of costs it is possible to divide them into:
Variable costs (they depend on returns)
Fixed costs (their amount do not depend on returns, usually do not change with the change of returns – usually overhead costs)
Financing of Building Order

11. Budgetary balance sheet
BUDGET OF ACCOUNTING CENTRE – accounting centre 001 – n
Production
material
wages
overhead
sub-supplies
Budget of costs
PRICE BUDGET 1 - n
FINANCIAL BUDGET OF COMPANY
Sale
Budget of revenues
Budgetary P/L report
Budgetary balance sheet
Budget of cash-flows
costs
revenues

12. Budgetary Profit/Loss Report
Profit/loss report includes information data about the economic result – the profit of the loss, basis for the economic result assessment is the budget of revenues and costs
Those budgets are derived from lower level of various kinds of budgets
Revenues come from the budget of the sales
Costs are the result of budgets of costs next classified as the buget of unit costs, the budget of direct production costs and the budget of overhead costs
Contrary of the P/L report – part of final accounts – the budgetary P/L report differs in purpose classification of costs
Budgetary P/L report is created with partial budgets of costs and revenues of particular departments, those budgets are filled with particular items of costs (budget of costs)
Separate budgetary part coming from the budgetary P/L report is usually area of the profit division
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13. Budgetary Balance Sheet
Classification of budgetary balance sheet comes from the balance sheet – part of the final accounts, but it is not so detailed
Information from budgetary balance sheet are based on particular groups of assets and liabilities:
Fixed and current assets
Equity and other sources
The most controlled groups are current property and short-term liabilities, where individual budgets are connected with the budget of cash-flow
Monitoring of cash-flow leads to finding out of the amount of working capital or net working capital
Sources for covering of the current property by long-term liabilities
Financing of Building Order

14. Financing of Building Order
Budget of Cash-flow
Budget of cash-flow it is possible to express from two aspects:
View of ability to pay and liquidity of the company
View of co-ordination of activities of the company, which fulfills the function of cash flows, its aim is the assurance of the fluent cash flow in the company
Budget of cash flow is connected with two areas:
Is elaborated from the reason of permanent need to finance – necessary to take into account the activity of particular parts as inventory, receivables and liabilities
Is elaborated for the purpose of transparent budget of cash-flows from the main business activity of the company – is based on following four parts:
Budget of revenues, budget of expenditures connected with purchasing of material, budget of wages and budget of overhead costs
Above mentioned budgets are created usually in big companies, in the case is the purpose of budget fully used
Financing of Building Order