It involves the comprehensive analysis of all cash flows and transactions in your company. Financial planning comprises six elements.

Revenue planning

Revenue planning represents the basis for the budgeted income statement and liquidity statement. It forecasts future sales volumes based on historical values. This ensures you retain an overview of which products are being sold to which customers and at what price.

Investment planning

the financing and economic viability of new investments for the future are assessed as part of investment planning. Firstly, information is compiled on the target investment and then evaluated by means of a critical analysis and performance audit. Is the investment really worthwhile? What financial resources are required? These questions must be answered when carrying out investment planning.

Capital requirements plan

The capital requirements plan determines when and how much investment has to be made in the company. It puts a figure on your financial requirements. A distinction is made here between long-term capital requirements, such as vehicles or machinery, and short-term ones, like materials and current expenses.

Liquidity planning

Liquidity planning provides a comparison of all expected income and expenditure over a defined period of time (generally not longer than 12 months). It provides accurate information about when funds must be available to cover costs due. Such planning is vitally important to avoid precarious financial situations and to secure the company’s future.

Budgeted income statement

The budgeted income statement is the key element of financial planning. It indicates whether and how much profit a company will make. In a first step, a sales plan is drawn up which shows the sales volumes that must be achieved for products and services over a defined period. The prices and variable costs are then linked to this. This indicates the gross profit. Fixed costs, such as salaries and interest, are deducted from the gross profit. The result is the company profit.

Budgeted balance sheet

The budgeted balance sheet shows how assets and liabilities will develop over a certain period of time – usually over a financial year. It is divided into assets (non-current assets, current assets, accruals and deferrals) and liabilities (equity, provisions, liabilities, accruals and deferrals).

How long-term and short-term financial planning interact

Although business decisions often depend on current situations, financial planning is important to the company’s financial security.A long-term financial plan helps to achieve objectives set and to ensure the company’s future prosperity. It forms the basis for sustainable optimization. Short-term financial planning is vitally important to identify liquidity problems at an early stage and to take appropriate measures. Only when all six elements of financial planning are addressed will you obtain a full picture of your financial position. Only then can you find the right solutions for the challenges your business faces.