Financial Operating Plan (FOP)
What Is a Financial Operating Plan (FOP)?
A financial operating plan (FOP) is a financial plan illustrating the revenues and expenses throughout some stretch of time. A financial operating plan utilizes past exhibitions, incomes, and expenses to forecast what's in store before long. It then integrates past and recent trends into the planning to most precisely forecast what is to come. It will characterize objectives for regions, for example, budgeting, sales, and payroll as well as make a cash flow projection.
Figuring out Financial Operating Plans
Like a business plan for another company, a financial operating plan assists managers and key investors with understanding how the company will operate and fill from here on out. It helps keep the company on target and distinguish regions that need consideration.
A decent financial operating plan should be amended and refreshed due to any extraordinary occasions connecting with finances, as well as to check whether it is as yet pertinent to the current situation. Whenever arranged and amended in like manner, a FOP can be a helpful device in making and dealing with the budget, further developing control of management operations, and eventually making profitability.
How a Financial Operating Plan is Used
A financial operating plan can, in numerous ways, be undeniably greater than a budget. The structure of the plan can be molded by the objectives of an organization or individual, how their assets might be applied, and ways of adjusting to accomplish wanted results.
Organizing a financial operating plan commonly requires input from across all divisions of an organization to make a complete structure of the costs and accessible revenue sources. The aims and plans of every division must likewise be accounted for, as they might influence the availability of overall capital for the projected period being planned for.
While a financial operating plan might format an organization's internal expectations, outer impacts at any point can influence the direction and completely finish of that plan. Changes in the market, fluctuating necessities of customers, and different factors can require a financial operating plan to be restructured in response. To adjust to such change, an organization might have to adjust its financial operating plan by taking an assessment of new outer factors as opposed to past trends.
Model
For instance, a retailer could utilize such a plan not exclusively to increase revenue and profits, yet to take into consideration expansion of the operation. Through a financial operating plan, the company can evaluate its expected liquidity and capital that would be accessible to support the development of extra areas, the hiring of more staff, as need might have arisen to support the expansion. The plan would likewise account for keeping up with the continuous business while obliging for expansion. Planned changes in the business, like the projected costs of research and development of new products, may likewise be accounted for in the plan.
Features
- Greater than an annual budget or financial statement, the FOP assists a company's insiders and possible investors with grasping its current and future financial situation.
- Utilizing past data, the FOP projects future operating income and expenses to figure out a company's growth or weak spots.
- A financial operating plan (FOP) frames a company's financial situation for the current and future periods.
