“Financial planning and improving of its methods”

The paper investigates issues, concerning financial planning at the enterprise. Methods and models of financial forecasting are analyzed and their unification is proposed. The main problems of financial instruments using (such as financial planning) are described. Planning is important element of management, which ensures achievement of strategic priorities. Effective financial planning is essential tool of achieving of the main goals of the enterprise ‒ profit maximization and cost of the enterprise. As market conditions in Ukrainian market of goods and services have its own specificity, which is defined, on the one hand, by means of analysis, formation and allocation of financial resources, and, on the other hand, the sources of reserves increasing, in order to implement the operating and investment activities to ensure their sustainable financial development. It should be noted that the formation of these processes has a significant impact on both objective and subjective factors, such as instability of tax policy and regulatory legislation for national currency, the impact of the global economic crisis, reducing the resources and available current assets etc. Thus, the increasing volatility of external environment requires managerial entities to speed decision-making and direct financial planning and forecasting, in order to reduce the impact of exogenous and endogenous factors on the financial activities of enterprises.


Introduction 
Financial planning is the most important component of company`s financial system mechanism and important function of its' management.
Financial planning is a key part of the whole planning process, making it possible to implement the strategic plans of the company through the development of specific action plans for the planned periodto accurately calculate the efficiency of available resources, the ultimate economic and financial results.Using the mechanisms of financial planning enables the company to achieve long-term positive results, contributing to strengthening the financial condition of the company and the stability of its position on the market.
Planning is the process of transforming the goals of the company into forecasts and plans, the process of setting priorities, means and methods to achieve them.Financial planning in theoretical aspect is considered as the most substantial and integral part of the overall planning of the company.As the company almost always affects the instability of the environment, uncertain economic conditions, the performance of the company depends largely on the state of financial planning in the company.A higher level of uncertainty, the more important planning, and correctness and accuracy of the forecast depend on the success or failure of business activity.So, summing up, we can determine financial planning as a purposeful process of system development plans and financial planning (regulatory) parameters to ensure the development of the company the necessary financial resources to improve its economic and financial performance in the current and strategic perspective.Financial planning, financial analysis and controlling system are essential parts of effective implementation of company's financial strategy.

Key research findings
At this stage, the transformation of economic development of our country, functioning and business should pay greater attention to such a process as financial planning.Nowadays, the majority of enterprises do not pay appropriate attention to financial planning, without which it`s impossible to achieve the appropriate level of management that provides company with a success in the market, continuous improvement of material resources and social development of the employees.The analysis of equity capital demonstrates its` increasing due to the growth of unappropriated balance.
The year 2014 was characterized by the reduction of profitability indicators.That is, the return on assets decreased by 8.21% and return on equity -by 13.0%.In 2015 these indicators grew: return on assets -by 2.36% and return on equity -by 5.24%.
Thus, the general conclusion is following: the company steadily develops increasing production volumes and total assets.
Considering the fact that activity of JSC "Kharkiv Tile Factory" is the subject to high uncertainty and inflationary economy, the company should use aggressive model of policy, which is characterized by the high ratio of current assets in total assets and the low speed of their turnover.As for current liabilities the company doesn`t use the aggressive management policy: liabilities of the enterprise are characterized by the predominance of equity capital in total liabilities.
Modeling of the financial activities of the enterprise was carried out by means of standard econometric methods.However, this approach is not able to reproduce the vibrations of the Ukrainian economic environment.
The trend line in this case is almost comparable to the regression line.The availability of trend complicates the use of correlation and regression methods to analyze time series.So, if we examine the correlation rows without exception of general trend, the distress index will characterize the correlations not only between short-term fluctuations, but also between the trends.Otherwise, the distress index will demonstrate the correlation only between short-term fluctuations.As it was mentioned, the trend is based on the past, current and future tendencies, if the changes, provoked by the influence of external and internal factors, are not expected.However, this trend does not always accurately reflect reality.
Regression and correlation analysis allows establishing and assessing the correlation between the investigated random variable Y and other variables X, and making predictions for parameter values of Y. So, Y is the dependent variable, X is called the independent variable.For example, X -cost of equity capital, Ynet profit volume.Let`s make the following regression: , where t r -trend; a 0 a 1 -regression coefficients;  t -perturbation model.
Let`s make a mathematical model for predicting net income, using the data of company`s performance in 2007-2015.The model will be as a linear trend.
To calculate the number of indicators such as average, variance and standard deviation, we made the auxiliary table ( Thus, the sample is quite homogeneous and the average is typical for the whole set.
The equation parameters are determined by the following method:

,
Solving the system of equations, we founded the parameters: Let`s find the graph parameters (Table 3).
The resulting system of equations is following:  The economic meaning of the regression equation is following: regression coefficient shows that each new period the net income of the company is increased by an average of 84059 ths.UAH.The parameter a 0 , as a free member of the equation, has only calculated value.
Graph of trend line is shown on Figure 2.

Fig. 2. Graph of correlation between time period and net income of JSC "Kharkiv Tile Factory" in 2007-2015, ths. UAH
The remaining variance is: The factor variance is calculated on the basis of variance adding rule: The correlation coefficient demonstrates that net income of JSC "Kharkiv Tile Factory" has direct and strong connection with a period of time.
The coefficient of determination equals: The study revealed rather efficient organization of financial work in the company.According to employees of financial department assessments the effective financial work can be explained primarily due to the availability of skilled workers.At the same time financial managers of the company deal mostly with the analytical support of investment projects.So, there is not enough time for financial planning.
The purpose of financial planning at JSC "Kharkiv Tile Factory" is to provide relevant reproductive process of the volume and the structure of financial resources.
The process of tactical financial planning at JSC "Kharkiv Tile Factory" can be divided into four stages:  determination of general directions of the company activities;  making the plans by the planning centers;  correction of financial plans according to the recommendations of management;  approval of plans.
Tactical financial planning is necessary for JSC "Kharkiv Tile Factory" mostly to control the cash flows of the enterprise.
Financial planning and financial management at the enterprise are made in isolation from the supply and marketing.That makes impossible to determine funding needs of the company.Moreover, the price formation is based on total expenses and profitability norm, excluding market factors such as market demand, the prices of companiescompetitors etc.Therefore, the company should have a thoughtful system of financial planning that will enable the company to accelerate the turnover of working capital, to decrease its` demands and obligations and to increase the efficiency of the company.
For the forecasting of JSC "Kharkiv Tile Factory" activity we use the multiple correlation.
Let's determine the parameters of the linear model of correlation between net profit (Y), current liabilities (X1) and equity capital (X2) (Table 4).The model will be looked as So, we received the following equation: The parameters a 1 and a 2 show the proportion of influence of this factor on the result, at the same time other factors are fixed at the constant average level.The additional attraction of 1 ths.UAH of own funds will increase net profit of the company by an average of 436.2 UAH. 1 ths.UAH of borrowed funds increasing will raise net profit to 295.6 UAH.

. Graph of polynomial model for current liabilities
Thus, the model has the form: The coefficient of determination of the model: R² = 0,632 (or 63.2% of total variation of current liabilities correspond to the model).
Let's calculate predicted value for 2016-2017 years.Let's forecast the value of equity capital (Х2) for the next periods using exponential smoothing models (Figure 6).

Fig. 6. Graph of exponential smoothing for equity capital
The model will be looked as:   We can observe some cyclicality in the values of net profit, which is not included in polynomial models of the second order that undoubtedly affects the quality of the model.Also, the model of multiple regression doesn`t include all factors, which impact net income.Thus, we advise modern systems of net profit forecasting, which are based on imitation modeling.
Nowadays the company has a problem of ineffectiveness of planning and forecasting, which demonstrates the inability of these tools to cope with the tasks.Therefore, in order to avoid unsatisfactory results the management entities of JSC "Kharkiv Tile Factory" should draw more attention to the ways of improving of system of financial planning and forecasting of the company (Table 6).
Table 6.The propositions of improving of financial planning system of JSC "Kharkiv Tile Factory"

Reducing of time for submission of information and decision-making
Company should implement monthly monitoring of deviations of planned and actual performance; quarterly adjust financial plans; implement separate accounting of management decisions and analyze their impact on its` performance in order to make necessary managerial decisions

Transparency and accuracy of data
To ensure the system of financial planning has improved, it`s necessary to make all data true and to confirm them by relevant documents and calculations

Implementation of information technologies
Nowadays JSC "Kharkiv Tile Factory" uses the programs of accounting automation, however, these systems are unable to provide the company`s management with the necessary information and, thus, the question is raised about the developing of its own information system to support financial planning that takes into account the profile of the company and its` information needs Strategic planning Implementation of strategic plans, which will enable to plan and predict various phenomena and processes

Accounting of risks
Accounting of risks in the planning process is proposed to make by predicting of several scenarios with different degrees of risk, estimated by mathematical and empirical methods

Organization of planning department
The department should have interlinked departments: the department of business processes and the department of financial planning, which should be separated from other entities.
Any measures taken to improve the financial planning system of JSC "Kharkiv Tile Factory" are ultimately caused by certain cash transactions.Thus, correct and rational organization of financial planning is one of the most important factors of effective economic policy, which contributes to its full adaptation to volatile market conditions.Let`s formulate several tasks, which would promote the formation of effective financial planning system.
The financial planning system of the company consists of elements, which are necessary for its` formation, such as input, process, output, control and limitations.Adopting these elements to the financial flows system we consider the financial flow as the input (output) of the system, which is transformed into another financial flow and / or the flow of another resources (labor, material, technical, information).So, the system is in the state of constant transformation.
JSC "Kharkiv Tile Factory" as a complex and multilevel system is represented as a combination of various elements and interrelations.The variety of forms and aspects of company's performance is reflected in production volumes, resource structure, operations and interrelations with the external environment.It should be mentioned that the company can survive in a competitive environment when the rate of system development matches the external environment and when the system is quite dynamic and mobile.The movement of company`s resources is quite natural for the developing system.As the movement of the resources is reflected in financial relations, the financial flows are direct or indirect reflection of all resources movement.Incoming financial flows come from the external environment, pass through the appropriate management levels and are converted into the output flows, which enter the external environment.So, we can see correlations between the financial flows movement, resources movement and the performance management system.Such an approach realizes implemented production concept of simulation models.

Conclusion
So, the result of financial planning introduction is a system that increases the efficiency of JSC "Kharkiv Tile Factory" performance and allows:  to predict the financial results of the enterprise;  to improve the efficiency of exploitation of resources;  to receive precise information for decisionmaking;  to improve competitiveness of the company.These measures would provide the managerial authorities of the company with the following preferences:  effective and precise assessment of financial stability level, possibility to identify reserves, potential and real threats;  making of strategic decisions in order to improve company`s competitiveness;  getting management reports on the activities of the company;  providing of budgeting system effective functioning.
Thus, JSC "Kharkiv Tile Factory" must have effective and transparent system of financial planning.
The above mentioned measures will enable the company to accelerate the turnover of current assets, decrease payables and receivables, increase the efficiency of the company.The proposed mechanism of financial planning will allow achieving target (normative) indicators of solvency, liquidity and business activity.
Since the optimal size of financial resources at the enterprise is determined by various criteria and indicators, the authors prefer such indicators as profitability, regulatory solvency indicators, financial independence indices, indicators of stability and business activity.


To assess the influence degree we calculate the correlation index as the ratio of two variances:

Fig. 3 .
Fig. 3. Graphic representation of net income forecast of JSC "Kharkiv Tile Factory" in 2007-2017, ths.UAH However, connecting the dynamics of income only with the time period is not right, because 3.5% of this index correlates with other factors.

Fig. 5 .
Fig. 5. Forecasting of current liabilities based on polynomial model

Fig. 7 .Fig. 8 .
Fig. 7. Forecasting of equity capital on the basis of exponential smoothing model

Fig. 9 .
Fig. 9. Forecasting of net profit on the basis of polynomial model

Table 1 .
The analysis of the technical, economic and financial performance of JSC "Kharkiv Tile Factory" in 2013-2015 years The annual average number of staff increased by 87 persons or by 7.74% in 2014 and decreased by 48 persons or 3.96% in 2015.This led to an increase of labor productivity.Wage fund is growing steadily -by 24.57% in 2014 and by 18.14% in 2015 and annual average wage shows similar trends.This demonstrates the effective personnel management organization as the labor costs are lower than the labor productivity.Production costs increased in 2014 by 17.89% and by 26.71% in 2015.In 2014 gross profit increased by 35.04% in 2014.Next year gross it increased only by 2.47%.The amount of net profit was 116 564 thousand UAH in 2013.It decreased by 30.92% in 2014 and increased by 60.87% in 2015.

Table 2 .
Auxiliary table for calculation of time series variation

Table 3 .
Initial and defined data for the calculation of regression line of net income of JSC "Kharkiv Tile Factory"

Table 3 (
cont.).Initial and defined data for the calculation of regression line of net income of JSC "Kharkiv Tile Factory"

Table 4 .
Input data for the multiple correlation, ths.UAH Let`s calculate the predictive value of net profit on the basis of multiple regression model: