The financial plan of a company is part of the business plan of a company along with other areas such as marketing, human resources, and operations, legal. Once all the previous areas have been defined, it is time to check if it is feasible and see our financing needs, which include office costs, the purchase of material, the salary of employees...

Why do you need to make a financial plan?

• By doing so, you know the short-term financing needs (routine operation of the company) and long-term (investment financing).
• You know the economic viability and the possible returns and conversions.
• Analyze the minimum volume of sales necessary to start making money, overcome the well-known breakeven point.
• It allows studying the possible factors that can affect both positively and negatively the company.

Benefits of making a financial plan

The first year of any company is the most difficult; getting a foothold in the market and without having many losses is the goal of all entrepreneurs. A good financial plan can avoid making mistakes that cause you to resort to more capital or even the closure of the business.

Among the main benefits of creating a financial plan we highlight:

• Know if the business idea or our project is profitable.
• Check financial health and see what our current and future needs are
• Identify the initial investment needed to achieve income.
• Know how many resources we need to offer our products and services for an estimated time.
• Know what our production capacity is is to calculate the income that we can get.
• Identify funding sources to which it is due and can be used
• Define strategies and scenarios (short, medium and long term) to improve the financial situation
• Disclose all the financial information of the company to the rest of the actors: partners, investors, suppliers...

As entrepreneurs, we can take advantage of all these advantages as long as we continue with our financial plan even if the business is already set up and running.

The 5 key aspects of a financial plan

Depending on the nature of the company, the financial plan may have more or less variables. In any case, we must never ignore the following points:

Investment plan

In this first point we must define what the necessary investments will be for the start-up. Here there is also room for the needs of operational treasury, payment to suppliers, and stock of materials...

Balance

It allows to analyze and know the financial situation of the company at a given moment. Essential to identify the value of a company, how much it owes and how much it has.

Cash budget

 It is the sum of the different budgets (sales, administration, development, capital…), the sales forecast, the personnel plan and the cost of sales. You should also check the cash flow statement, through which you record the transactions that affect the amount of available cash.

Provisional profit and loss account

You must make a forecast of future results in which you include the volume of sales and other income and the costs necessary to offer your products and services. From here, it is necessary to make a balance of the provisional situation in which investment forecasts, financing and income statement are integrated. In this way we will calculate the break-even point or profitability threshold of the company, and we will see if we can achieve it with the expected sales.

Treasury plan

It reflects the outflows and inflows of money based on the operations that a company is going to carry out during a certain time. We will be able to know at all times the liquidity situation of the project and if it is necessary to resort to external financing.

Sources of financing for export: options to inject capital into your international business

How does financial factoring help grow your business?