Financial planning is how a business better understands its financial status. It involves framing financial policies to guide procurement, investment, and allocation of financial resources within a company.
Financial planning also offers businesses benefits such as creating a reasonable balance between the outflow and inflow. The balance is often needed to achieve a stable financial state, facilitating business growth and expansion. With sound financial plans, a business stands a higher chance of maximizing financial resources operationally and profit-wise.
Businesses can go about their financial planning in two significant ways. The first is through the traditional planning method. The other way is through integrated financial planning. Though these two processes seek to help the business achieve a healthy financial stand, they exhibit distinctive features.
Defining Traditional And Integrated Financial Planning
Traditional financial planning involves using financial professionals, often referred to as financial planners or advisors. These experts evaluate your financial operations, performance, and health to find ways to make necessary improvements.
Furthermore, traditional financial advisors can help you make different financial plans ranging from risk and investment management to wealth management. Thus, traditional planning serves as an avenue for a business to maximize financial resources and reach significant milestones.
On the other hand, integrated financial planning helps businesses plan for the future while considering several business variables. It’s hybrid due to the blend of virtuality with physicality and in-house with outsourcing.
This kind of planning seeks to connect the plans of various departments in the business to achieve operational alignment across the company. The process is needed to create a continuous collective flow of data that enables all the departments within a business to collaborate and work iteratively.
Traditional Vs. Integrated Financial Planning
Both traditional and integrated financial planning processes offer businesses great benefits. However, the question is, which of these models is right for your business? Below are some factors to look at:
- Data Maximization
Integrated financial planning is data-driven. It often requires data sources to generate accurate forecasts and make meaningful projections. By utilizing the correct real-time data, you can conduct the analytics for your business. You can also automate and integrate financial processes using data. You can click here to learn more about how this works.
However, there’s not much interplay between data and automation in traditional financial planning. The planning doesn’t work with data as much as integrated planning. Therefore, it’s usually bereft of analytics to make accurate financial projections.
- Business Decision-Making
Businesses can take advantage of opportunities when they make proper and timely decisions. Better decisions are often driven by the right information. Through integrated financial planning, business leaders can gain a global and heightened perspective of the business and make holistic decisions for growth.
But in traditional planning, businesses have a limited perspective of their financial status. This is because there’s nothing much about analytics and, therefore, no objective measure for decision-making. Moreover, traditional planning involves the use of conventional tools which slow progress and make decisions hard to make.
- Departmental Coordination
Integrated financial planning offers you the chance to collect comprehensive and accurate information across all departments in your business. To achieve this, business managers work with crucial department stakeholders. This joint operation helps various departments be in sync with the company’s overall financial state and objectives.
It’s a different ballgame with traditional financial planning. Crude tools mean departments don’t get to collaborate on projects in real-time. Poor collaboration leads to poor coordination. Therefore, businesses using traditional financial methods hardly achieve their objectives. Consequently, they’re faced with stagnant business growth.
- Risk Minimization
Integrated financial planning considers data, the most crucial business and financial component, thereby increasing the likelihood of achieving the company’s financial goals. Planning done with accurate data is not as risky as that drawn without adequate data.
On the other hand, lack of data is the bane of traditional financial planning. If information is lacking and decision-making is poor, there’d be an increase in risks and business threats. Eventually, the company may run out of ideas and capital for continuity.
- Operational Control
An integrated plan encompasses and adequately addresses business variables. It clarifies business objectives, increases the efficiency of the management, and offers more operational control to your leaders. When you have well-rounded financial plans, you can exercise a better grip over your financial operations.
However, this is not the case with traditional planning. The operations of most traditional plans are stagnant and backward. They’re often stuck on certain repetitive variables. As you’d expect, repetition leads to rigidity, which brings about a lack of operational flexibility.
As much as traditional financial planning offers your business significant benefits, the myriad innovative and modern-day advantages of integrated financial planning make it a better option for your business. Rather than have a financial advisor check on your finances alone, you can get a holistic view of your business operations through integrated financial planning and take comprehensive measures to improve your finances.