Corporate Financial Planning

Corporate Financial Planning (CFP) is a systematic process guided by financial executives, which is designed and carried out with the purpose of establishing financial policies for the future and the goals to ensure the growth or survival of the organization. This process takes as inputs on the one hand, the current financial state of the organization and on the other, the possible scenarios. As a result, through an aggregation mechanism with the participation of different organizational divisions, a comprehensive corporate financial plan is established.

The corporate financial plan is a manual containing, firstly, the financial objectives and policies, which go hand in hand with the general philosophical and strategic approach of the organization. Secondly, the manual incorporates a summary of the consolidated financial result of all investment projects and business units belonging to the investment portfolio. This includes the most outstanding features in terms of opportunities, risks assumed, interactions between corporate financing and investment decisions, and capacity to cope with expected and unexpected situations. Thirdly, the corporate financial plan contains the capital budgeting itself. That is, the investment plan including, in addition to a list of investments, an implementation schedule and the respective funding source in each case. Financing is subject to the options on the market, the cost of capital, capital structure, projected discounted cash flow (DCF) and organizational policies. Individually or in groups, investment projects are based on a budgetary analysis including, on the one hand, both the analysis of the ordinary activities using techniques for the revenue forecasting, and proper determination of the cost structure, by applying the relevant technical and administrative studies. On the other hand, details regarding financial incomes and expenses are expressed, as well as depreciation, amortization and debt service. As is known, this analysis makes a special examination of the tax aspect, depending on the country concerned. Finally, the corporate financial plan includes a consolidated cash flow projection (comprehensive and detailed), particularly noting the organization's ability to grow or survive.