Importance of Financial Planning :

(a) Elimination of waste—Through Financial Planning, several factors such as change in government policy on tax, fluctuations in interests rate etc can be efficiently anticipated and duly tackled. If there is lack of proper Financial Planning, the organisation may suffer huge irreversible and uncompensable losses due to wasteful expenses.

(b) Co-ordination among different business functions—Various business functions like production, distribution, marketing and human resources will hamper if they are not properly supported by effective financial planning. Financial Planning prescribes policies, procedures etc. defining how the funds should be used. Thus, there is uniformity in financial matters across the business functions which brings coordination among these.

(c) Dynamism—Business organisation work in dynamic environment full of shocks and surprises. Thus, through effective financial planning organisation prepares itself in advance to face various environmental shocks and surprises promptly.

(d) Communication—Proper and effective Financial Planning facilitates the finance manager to communicate the various aspects of financial plan to the different departmental heads. This further helps to eliminate the wastage of time and effort, and effective implementation of financial plan brings growth of financial resources and increases goodwill of the organisation.

(e) Decision making—Financial Planning helps a firm to take appropriate and timely decisions to achieve the desired goals. Thus, to implement any scheme or any project, there must be a budgetary provision in the Financial Planning.

(f) Integration—Financial Planning is prepared and completed only when there is proper communication, consultation and cooperation of all the departments of the organisation. This in turn helps in integration of various organisational activities and promotes various activities, team spirit among all the executives of the company. 

(g) Futuristic—Financial Planning is done considering not only the present but also the future developments. It tries to link the present with future. This futuristic component of Financial Planning assists in advance programming.