Financial planning

A modern, horizontally- and vertically-integrated business planning framework may help your business learn from its past, follow its targets and create interconnected business functions that work effectively. It also assists your business in creating interdependent and efficient working functions.

Bring together the plans of different business functions to support real-time analysis, reporting and decision-making around operational plans, and then translate these into solid financial plans.

Business plan

A business plan is vital for the success of your business and to secure sufficient finance and business liquidity. Creating the plan helps you to gather all ideas and opportunities into one place and to follow a structured process when making growth choices. 

A business plan is usually created before something is built. It helps your business to answer questions such as:

What are the customers’ needs?

Do you understand all the costs?

Will it make you enough money? 

Business plans guide you in achieving your goals and turning your ideas into reality.

A key part of the analysis is the financials (number of paying customers) and so typically, creating a spreadsheet showing sales, revenue, cost and profitability is important. Showing a financial analysis to your creditors or investors will increase the perceived reliability of your business and demonstrate the viability of your idea. 

Develop a formal business plan outlining a strategic plan and an operational plan. Assess financial stability and identify variables that will impact revenue and cost.

The financial section of a business plan describes the financial analysis that is performed as part of the business case assessment process. The main input to this is the spreadsheet model you develop to forecast the sales, revenue, costs and profit – this section summarises the output from the model.

Financial plan

A financial plan is an investment in the future. Effective planning can help your business achieve long-term financial security so you should begin financial planning as early as possible. 

Your financial planning process should include setting goals and objectives, as well as cash flow planning and budgeting. 



To create a financial plan, you need to provide a detailed evaluation of your business or business concept, including:



action plans

allocations of resources and expected revenues to expenses categories.

If there are any resource shortages, provide a plan for how these will be overcome.

Do not confuse the financial plan with financial statements. Unlike financial statements, a financial plan includes pro-forma statements populated with expected figures based on past performance, if applicable, but does not provide actual financial results. 

Monitoring business activity

Review your processes continuously to ensure that they stay at the forefront of innovation and improvement. Budgeting and financial reporting are some of the critical processes in any businesses.

Your business can make timely and effective decisions if it gets financial information that is of a high standard and is presented on a timely basis. This information should be produced in a cost effective manner.

Your challenge is to develop an efficient, accurate and repeatable reporting process that helps ensure the integrity of financial information from beginning to end. This is critical in order to manage the timeliness, reliability and transparency of the period closing and reporting processes. 

Financial reporting plays an essential role in explaining past performance and provides you guidelines for your future business decision-making. Your role should also encompass regular monitoring of your financial performance and actions to help you keep track of where your money is invested. 

You should ensure your financial statements are provided in accordance with applicable local and international accounting standards.

Ensure effective internal controls over financial reporting and emerging risks. An effective system of internal controls provides necessary assurance in the business’s ability to respond promptly to adverse external disturbances and involve internal resources to achieve the objectives set for each business process. Some internal controls may include the four eyes principle (more than one person approves each decision), direct oversight, and the segregation of duties for expense authorisation. This will help you mitigate material risks and ensure your financial statements are reliable and accurate. 

Financial monitoring is focused on comparing actual business progress with financial plans and projections and this is based on financial reports and statements. Effective financial monitoring should result in actions to improve any inefficiencies spotted or to further boost business performance. 

Budgets are important as they allow you to keep track of your operations and assist in planning and analysis when a business exercise is undertaken. A budget versus actual results report (budget monitoring reports) would highlight any deviation from planned goals or objectives and allow you to take corrective actions.


Analyse the financial performance of your business on a regular basis and keep an eye out for early warning signals to spot financial difficulties on time and to decide on appropriate action. 

Illustrative example of using financial ratios to determine whether you need to restructure your business

Regular monitoring of your business financial ratios helps you determine if you are facing significant difficulties that would require restructuring actions to be taken. Your primary focus should be on debt to equity, current and quick ratios. Even if your business is profitable (your profitability ratios are stable and at satisfying levels), if you lack cash or access to cash you may be forced out of business. 

If your solvency ratio is too high, there is little or no scope for additional borrowing. The interpretation of your debt to equity ratio depends on the industry you are operating in. However, a general understanding is that a ratio below 1 is considered safe, while anything above 2 should be considered risky.

On the other hand, your liquidity ratios can indicate potential cash problems you are experiencing. If your current and quick ratios are below 1, it means you cannot pay your current liabilities in the short term and should start preventative actions to save the business from serious financial problems. Ideally your current ratio should be above 5 (or at least above 3) and your quick ratio should be above 1. This indicates you are capable of paying your short-term obligations.

Keeping your financial records

Well-kept accounts form a basis for sound financial decisions and enhance credibility in the eyes of investors. They are therefore important for any business. You need to consider how you will keep your financial records and for how long. 

Keeping good records can benefit your business in many ways. Having detailed and accurate financial information you can easily access will help you with:

analysing your business’s performance and maintaining your business’s financial health

fulfilling your tax and pension obligations accurately and on time

attracting investors

making better and more educated business decisions. 

Make sure that all your records are kept in accordance with the relevant laws and regulations. 

Manual bookkeeping 

Manual bookkeeping is a paper-based way of keeping records. It often uses multiple books and ledgers that can be bought at an office supply shop, and should be used if you are unable to set up digital or electronic bookkeeping. 

Electronic bookkeeping 

Electronic bookkeeping can be performed either on spreadsheets, such as Excel, or using dedicated accounting software or web-based platforms such as QuickBooks or FreshBooks. 

Electronic bookkeeping is more convenient for businesses because it requires less physical storage, less time and less work. Totals are calculated automatically and the system can generate the final reports. 

Unless paper copies are required by law, electronic versions of reports may replace paper ones, providing security against losing them through fire, theft or damage. However, you should take care to back up your electronic bookkeeping data.

Digital bookkeeping is an important aspect of your business going digital.

Document retention

For both manual and electronic bookkeeping, it is important to keep the information and reports at a secure off-site location. While manual books have to be kept in a physical location, electronic books are usually kept on cloud storage services. 

The type of records you have to keep and for how long varies from country to country and may be different according to the nature of your business. 

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