“I love it when a plan comes together”: the importance of a financial plan for your company

Whether it is about financing, annual budgeting, an IPO or the transfer of a (family) business: the financial plan is an essential element, no matter what stage the company is at. It is a roadmap that must be regularly updated to facilitate decision-making.


What is a financial plan?

The financial plan is an integral part of the business plan. While the business plan describes the strategy and ambitions of the company in a broad sense, the financial plan focuses on the numerical aspect of the company’s development. It contains a whole series of assumptions concerning the evolution of the company’s turnover, the corresponding profitability and the expected investments. The financial projections in the financial plan usually cover a five-year period and make it possible to anticipate the company’s development.


« While the business plan defines the strategy and ambitions of the company in a broad sense, the financial plan focuses on the numerical aspect of the company’s development. »


What should be included in a financial plan?

The financial plan generally includes the following financial statements:

  • overview of the expected revenues and costs;
  • overview of the balance sheet structure;
  • overview of the expected cash flows.

The financial plan includes a detailed explanation of the main assumptions and parameters. If the financial plan is drawn up at the start of a company, a monthly forecast for the first year will provide more insight in the development of the company.


What is the purpose of a financial plan?

Depending on the stage of development of the company, the financial plan can play different roles.

When the company is being set up, the financial plan makes it possible, above all, to determine the financing requirements necessary for the start-up of the company and thus to define the most suitable financing strategy. Moreover, when external funds are first raised, the financial plan is an essential part of the negotiations with investors and banks. It also serves as a basis for valuing the company’s shares, in particular through the Discounted Cash Flow (“DCF”) method.

While the financial plan is particularly useful at the time of incorporation, it is equally useful at a later stage, as it provides a clear overview of the company’s expected financial situation over the next five years. It is a dashboard that is regularly updated and provides valuable information for decision-making.


« The financial plan is a roadmap that needs to be updated regularly to facilitate decision-making. »


Should I be guided in drawing up a financial plan?

Advice and assistance in drafting a financial plan offers a significant added value. From our own experience, we have found that external advice leads to asking the right critical questions, to checking the set parameters and assumptions, and thus to drawing up the financial plan as realistically as possible. Such guidance is also useful in the preparation of discussions with investors and banks in the case of external financing.

Are you looking for guidance in drawing up a financial plan? Do not hesitate to contact Fabio Dioretico for more information.

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