Creating a financial plan: The basis for sustainable corporate success

What is a financial plan?

A financial plan is a central document that contains financial strategy of a company presents in detail. It includes forecasts of sales, expenditure, investments and capital requirements and thus forms the basis for financial decisions.

The distinction from the business plan is important here: In contrast to the business plan, which covers the entire business model, the financial plan focuses on financial aspects of the company. The business plan determines the direction in which the company wants to go, while the financial plan shows the resulting financial situation of the company and ensures that the financial resources are available for the desired corporate development.

The financial plan therefore gives you a clear overview of the financial flows of your company and serves as Guide to your financial decisions.

Why is a financial plan important for companies?

A financial plan is a strategic instrument, which provides comprehensive insight into all financial aspects of a company — from revenue and costs to profits, profitability and liquidity.

It works like a building plan for a house: It helps to avoid financial bottlenecks, to plan investments in a targeted manner and to put growth on solid foundations. Without a well-thought-out financial plan, it would be as if you were building without a foundation — stability and long-term success would be severely threatened. A financial plan shows you exactly when and how you need to use your resources to safely achieve your goals.

In addition, the financial plan makes it possible to identify early on when adjustments are necessary to get your company back on track. The financial plan must address both the short-term aspect and the long-term perspective of three to five years depict. In this way, you ensure that your company remains sustainable and successful on the market in the long term.

Who needs a financial plan and when should it be prepared?

Every company needs a financial plan — regardless of its size or industry. The relevance of the financial plan remains relevant throughout the life cycle of a company, from inception to expansion and beyond. However, the objectives or reasons for a financial plan may vary.

In the business plan for the start-up

If you start a company or aim to become self-employed, the financial plan is part of your business plan. It shows potential investors and banks how much Start-up investments You need how you are going to use them and how you plan to become profitable. The financial plan also shows how much revenue your company can generate with its idea and how lucrative the desired business really is in essence. Without this plan, it is almost impossible to secure funding.

For investor talks

Start-ups often need additional capital to realize their growth plans. A detailed financial plan is important for founders in order to Convincing investors that their own business model is sustainable and the capital invested contributes to increasing the value of the company.

For annual planning

For established companies, the financial plan is indispensable in annual budget and resource planning. It serves as a template and helps Set financial goals for the coming yearto control expenditure and ensure that sufficient capital is available for ongoing and planned projects.

For external company valuations

A detailed financial plan is also required in the event of mergers, acquisitions or an IPO. It shows investors the financial situation and growth potential of your company, makes it easier Determining the value of the company and strengthens trust in important negotiations.

For larger investment projects

If your company is facing major investments, for example in new technologies, locations or personnel, the financial plan helps Determine capital requirements precisely. This ensures that financing is secured and that the investment project can be successfully implemented.

How is a financial plan structured?

Financial planning comprises various components, which may differ depending on the specific requirements of the company. As with so many things, there is no uniform method. However, companies should always consider the following elements when preparing a financial plan:

• Sales planning: forecasts of future sales based on historical data, market analyses and planned sales strategies
• Cost planning: Recording of all fixed and variable costs that arise in the company
• Contribution margin: Analysis of which products or services make the biggest contribution to covering fixed costs
• Profitability planning: Calculation of the company's profitability to ensure that sales cover costs and generate profits
• Investment planning: Planning and financing future investments
• Liquidity planning: Ensuring liquidity to cover current expenses and avoid financial bottlenecks
• Capital requirements and financing planning: Determining capital requirements and planning financing, whether through equity, loans or other means

Create a financial plan: step-by-step instructions

A financial plan consists of several central sub-plans, which together provide a complete picture of your company's financial position and future prospects. The following steps will help you to approach financial planning in a structured and well-thought-out way, so that you have a complete overview of your finances in the company.

1. Sales planning

Revenue planning is the first and most important step in creating a financial plan. Here you consider what sales your company will generate with which products and which customers at what prices.

It is advisable to plan several scenarios to take into account different developments and uncertainties. You should tend to be more careful. Many tend to make too positive assessments here.

Well-founded planning is based, among other things, on the Analysis of past sales, The latest market trends, competitive analyses and the expectations of your customers. It's important to have direct conversations with your customers to confirm their purchase intentions and existing contracts. In this way, you create realistic forecasts that provide a reliable basis for your financial plan.

2. Cost planning and contribution margin calculation

Cost planning involves a detailed List of all costs created — including material purchases and goods purchases to marketing costs, external work, personnel expenses and salaries. In particular, the material costs, the use of goods and the direct external and personnel costs for generating sales are important in order to calculate the contribution margin — the contribution that each product or service makes to cover the costs.

Important contributions are:

• Contribution margin 1 takes into account direct, variable costs such as materials, goods or even variable personnel expenses. This contribution margin shows you whether the turnover of a product or service exceeds variable costs and thus makes a positive contribution to covering fixed costs.
• Contribution margin 2, 3, 4,... goes one step further and also includes parts of the fixed costs in the contribution margin statement. These can be product-specific fixed costs (e.g. a special machine) or product-group-specific fixed costs (e.g. a warehouse). This gives you an even more accurate understanding of which products make a positive contribution to the company's results.

The contribution margin statement helps to ensure that total income is sufficient to cover all fixed and variable costs. It also provides information on which products or services are profitable and which may need to be adjusted.

3. Profitability calculation and break-even point

The difference between sales and costs results in your profit and therefore also the profitability of your company. Die profitability planning, also known as profitability forecast or income forecast, answers important questions such as:

• How profitable will the company be in the future?
• What revenue and cost structures are necessary to achieve profit targets?
• What investments are required to increase profitability in the long term?

This planning also plays a decisive role in convincing potential investors of the profitability of your project.

Die Break-even Once again, show you How much do you have to sell monthlyto cover all costs. To do this, divide the fixed costs by the contribution margin 2. The result gives you the minimum quantity or turnover that you must achieve in order to be profitable.

If your company offers multiple products or services, the calculation becomes more complex as you need to determine the required revenue for the entire portfolio. Take seasonal fluctuations and industry-specific features into account to make realistic forecasts.

4. Investment planning

The investment plan is about identifying the necessary investments in categories such as machinery, vehicles and IT and planning financing. What matters here is the The right time to invest to choose so that the required capital is available exactly when it is needed.

It is also important to analyze the risks and potential returns of the planned investments and to take into account the depreciation of investments. Depreciation distributes the acquisition or production costs of an asset over its economic useful life.

5. Liquidity planning

Die Liquidity planning complements previous plans and ensures that your company Able to pay at any time stays. It takes into account all income and expenses in a specific period of time, such as repayments, taxes, rents, shareholder contributions, license payments, supplier invoices and personnel costs.

Liquidity planning should cover both short-term and long-term liquidity requirements and include liquidity buffers or emergency reserves. Planning enables you to identify potential bottlenecks at an early stage and take appropriate measures in good time.

6. Capital requirements planning

Capital requirements planning, including planning of financing strategies, is carried out in parallel with the previous steps. Here you decide How much capital does your company need in the coming years and the ratio of equity and debt capital to be used. This ensures that your company always has sufficient financial resources.

Challenges and typical sources of error when preparing financial plans

Preparing a financial plan is a complex task that involves a few pitfalls. Even small mistakes can have a significant impact on a company's financial position and growth. By avoiding these typical mistakes and paying attention to realistic, well-structured and professionally prepared financial planning, you lay the foundation for the long-term success of your company.

Unrealistic estimates

One of the most common mistakes in financial planning is to To estimate sales too optimistically or to underestimate costs. Over-optimistic forecasts can result in the company suddenly facing financial bottlenecks if actual sales fall short of expectations or if spending is higher than planned.

These estimates are often based on assumptions that are not clearly comprehensible or verifiable. It is therefore important to plan conservatively and play through various scenarios in order to be prepared for possible deviations. This point brings us to another challenge:

Missing scenarios and sensitivity analyses

Unrealistic estimates occur when companies refrain from using scenario and sensitivity analyses. Without these tools, planning remains rigid and inflexible, which significantly limits the ability to respond to change. By playing through various scenarios (such as optimistic, pessimistic, and realistic scenarios) and understanding how sensitive certain assumptions react to external factors, you can improve the robustness of your financial plan. Sensitivity analyses and realistic assumptions based on market research and historical data are essential.

Missing buffers

Without sufficient reserves, your company can quickly get into trouble in the event of unexpected spending or loss of income. A good financial plan always takes into account buffers to to cushion unforeseen events and to secure liquidity. These reserves should cover both short-term and long-term risks to ensure a stable financial basis.

Inadequate liquidity planning

Liquidity planning is often underestimated, as many entrepreneurs believe that by preparing the income statement, they have already done everything necessary to ensure and present the success of their company. But care should be taken here: If liquidity is insufficient, even if only for a short period of time, even the best profitability and the strongest revenue growth lose their value. In such cases, the company can quickly get into trouble, as lack of liquidity is one of the most common causes of business failure.

Unstructured structure of the financial plan

A financial plan that is poorly structured or confusing can cause more damage than good. Misunderstandings and wrong decisions are then quickly inevitable. A financial plan should therefore clearly structured and based on the Be focused on essential information, so that it is convincing and comprehensible both for internal purposes and for external stakeholders, such as investors or banks.

Financial plan that is too short or too extensive

A financial plan that only comprises one page is usually too superficial and omits important details. On the other hand, an overly detailed plan with 100 Excel spreadsheets can be confusing and difficult to interpret. Find the right balance — the financial plan should contain all relevant information without becoming overly complex. A balanced level of detail facilitates interpretation and decision making.

Manual creation without appropriate tools

Many companies create their financial plan template manually in Excel. However, this is susceptible to errors and difficult to update, especially when it comes to complex calculations or changing framework conditions. Without suitable tools, inaccurate results and inefficient work processes can occur.

A specialized financial plan tool On the other hand, it offers integrated functions to create dynamic and precisely coordinated plans that are easy to update and adapt. In this way, you can significantly improve the reliability and efficiency of your financial planning.

Best practices: 4 tips for creating financial plans

So that your plan is not only complete but also effective, we have a few proven tips for you that you should follow.

1. Use financial plan templates

On the Internet, you can find many tried and tested Financial plan templatesto make your planning structured and efficient. These templates help you consider all important elements and minimize the risk of missing key details. Especially if you still have little experience in preparing financial plans, they will guide you Excel templates safely through the entire process and ensure that nothing important is forgotten.

2. Use software

The use of financial plan tools can significantly simplify and make your planning more precise. Many software solutions make it possible to automate data collection and analysis, which speeds up the planning process and minimizes errors. The software can run through various scenarios, adjust forecasts and provide you with well-founded decision-making tools.

Tidely For example, offers you dedicated Liquidity planning features and thus covers a central area of your financial plan. The software helps you keep track of all income and expenses. Thanks to intelligent cash flow forecasts Not only do you get an up-to-date overview of your finances, but you can also plan future developments precisely. This forecast allows you to proactively manage the financial health of your company.

Also for the investment planning Tidely provides a remedy by creating a integrated scenario analysis provides. With this function, you can simulate the effects of internal business decisions on your company's liquidity and run through various scenarios.

3. Review and adjust the financial plan regularly

A financial plan is not a static document. In order to comply with current developments, it should be regularly reviewed and be adapted to changing market conditions, corporate goals or unexpected events. These reviews must include current financial figures as well as underlying assumptions and forecasts.

4. Involve managers from all sub-areas in planning

Involve all managers in financial planning! If the plan is only prepared by management and controlling, important details can be overlooked. Acceptance and motivation also increase when all relevant managers are involved and identify with the goals.

With Tidely, you can Make team management efficientby giving various team members access to financial planning and managing their contributions centrally. This promotes transparency and collaboration within the company.

Financial plan as a basis for long-term success

A well-thought-out financial plan is more than just a document — it is the foundation for the long-term success of your company. It not only provides clear insights into financial health, but also helps to make well-founded strategic decisions and identify potential risks at an early stage.

Every company has its own unique challenges when it comes to creating a financing plan. Preparation requires a great deal of care and precise planning to ensure that all relevant financial aspects are taken into account. This is exactly where specialized software such as Tidely helps.

With a professional, software-supported financial planning Make sure that your company has a solid financial foundation and that your planning is flexible enough to adapt quickly to changing requirements. In this way, you can optimally prepare your company for the future and ensure that it remains successful even in dynamic times.

Financial Plan FAQs

How do I create a financial plan?

This is how you create a financial plan:

1. Determine your company's financial goals and requirements.
2. Collect historical financial data, market analyses, and forecasts.
3. Prepare revenue, profitability, cost, investment, liquidity and capital requirements plans.
4. Review various scenarios and adjust your assumptions.
5. Use templates or specialized software to structure and simplify the process.
6. Keep the plan up to date and adjust it regularly to changing conditions.

What belongs in a financial plan?

A financial plan should include the following elements:

• Sales forecasts: forecasts of future sales
• Cost planning: overview of all fixed and variable costs
• Contribution margin calculation: analysis of the cost contributions of products or services
• Profitability calculation: Calculation of expected profitability
• Investment planning: planning and financing future investments
• Liquidity planning: ensuring solvency and managing liquidity
• Capital requirement analysis: Determining capital requirements and planning the financing strategy

Who creates a financing plan?

A financing plan is usually prepared by the company's management or financial officer (e.g. CFO). This is often done in collaboration with Controlling and managers from the respective departments to ensure that all relevant information and perspectives are incorporated into the plan.

Why is it important to create a financial plan?

A financial plan is important because it ensures the financial health of the company, supports strategic decisions, minimizes financial risks, and promotes the company's long-term success. It enables precise budgeting, investment planning and liquidity management.

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