Long-Term Financial Planning
Financial planning includes analysis of the financial environmentand revenue and expenditure forecasting. It also includes several other essential features. A plan articulates the service level government wants to provide to its citizens — this allows financial resources to be reconciled with desired service levels. Long-term financial planning establishes the standards of financial stewardship to which the organization aspires, thereby providing a common language and framework for guiding day-to-day financial management decisions. Financial planning occurs through collaboration between elected officials and staff, thereby producing a shared understanding of service and financial strategy. This understanding allows elected officials and staff to focus their energies throughout the year on the matters mutually identified as most important to the community’s ongoing sustainability.
These characteristics of planning bring a number of benefits to government agencies:
Proactive Responses. A long-term financial plan enables proactive management of government finances, rather than reactive responses to financial crises as they occur. When you develop a long-term financial plan,you combine financial forecasting with financial strategizing to identify future challenges and opportunities, causes of fiscal imbalances, and strategies to secure financial sustainability.
Broader Outlook. Good financial planning does not simply project the status quo — rather, you consider a range of possible futures confronting the organization, examine the financial consequences, and determine the most appropriate policy and strategy responses. It is from this broad consideration that the primary benefit of financial planning flows: to stimulate discussion and thinking about the long-term impacts of decisions made today and how your organization can begin positioning itself now to maximize its ability to meet challenges, exploit opportunities, and deliver a stable level of essential services.
Improved Allocation of Resources. Financial planning brings a long-term perspective to resource allocation that is necessary for setting realistic boundaries on what your government can accomplish and helps direct resources to the highest priority activities. A long-term perspective integrates strategic planningand budgeting, enabling you to forecast, predict, and actively communicate challenges before they arise and opportunities.
More long-term financial planning resources from GFOA