For maximum efficiency, transparency, and the possibility of adjustment, planning processes are divided into several successive stages.

The analysis of the financial picture of the company operates with the main documents of the organization: balance sheet, a summary of reports on profit and expenses, reporting on cash flows. Based on the indicators of the previous period of an email marketing agency in LA, specialists carry out calculations according to the forecast of income, based on the amount of which management can plan the costs of current expenses or draw up financial plans for new projects. 

Estimates and Budgets

The project can be understood as many undertakings: investing, geographical growth, development of related industry activities (for example, many retail food chains master the production of their own products over time), and expanding the assortment.

Estimates and budgets reflect forecasts:

  • Balance for the planning period
  • Cash distribution
  • Cash inflow/outflow ratio

The set of these documents is included in the structure of the business plan of the enterprise.

Concretization of indicators of the company’s need for financial resources. The calculation of indicators is based on the assumed conditions for the functioning of the company in the planning period and therefore provides for several options for the financial plan: in simple terms, optimistic and pessimistic scenarios.

It is drawing up and approval of a financial plan. As a finished document, the plan is approved by an authorized person, after which it is integrated into the general strategic plan of the enterprise. The financial plan in the business plan is necessary as a guarantee of the appropriateness of the planned activity, clearly showing that the projected income will exceed the cost of its implementation (it is clear that otherwise the project is being finalized or rejected).

A rough example of calculating a financial plan in a business plan

A forecast is made of the main indicators affecting profit: production costs, sales volumes, expenses for taxes, contributions. This paragraph allows you to predict the size of net profit, the volume of which is calculated by the formula:

PE = Fin. profit + gross profit (revenue – cost) + operating profit (operating income – operating expenses) – taxes

The profitability of an asset, product, or activity is taken as the ratio of net profit from sales to operating costs.

Cash flow forecasting should take into account the income from all available sources, among which may be not only the main activity of the company, but also income from stocks, leases, and other investments. In the same way, all expenses are taken into account, including the most insignificant ones, such as the purchase of packaging packages for the outlet.

The “enterprise balance” section contains specific indicators and reflects the successful or failed nature of the enterprise. The balance sheet forecast allows you to visually see the rate of return, the profitability of individual assets, the need for borrowed funds.

The period of the financial plan should correspond to the period of the main business plan of the company.

  • Monitoring the implementation of financial planning is often confused with financial control, which is actually a broader concept. Monitoring the implementation of the plan has its own characteristics:
  • Determination of the circle of responsible persons (chief accountant, financial director, heads of units);
  • Approval of a list of specific indicators for subsequent comparison of the planned and real level, analysis of the reasons, methods of adjustment;
  • In the presence of deviations of indicators from the desired level, a decision is made either on budget regulation or on tightening control, depending on whether the causes of fluctuations in indicators are eliminated.

Forecasting

Talking about the content of financial planning, one cannot fail to mention such an important component as forecasting.

Financial forecasting examines the presence or absence of specific prospects for financial development, to then formulate assumptions about the size and most profitable areas of use of monetary resources.

In the forecasting process, different methods are used to determine the level of indicators:

  • Mathematical modeling of mutually influencing factors;
  • Application of the principles of economics and statistics;
  • A method for processing indicators by experts;
  • Development of several development scenarios.

The main problem that forecasting solves is predicting the need for additional external financing or the absence of such a need. The need for additional sources depends on the difference between the assets and liabilities of the enterprise and is most pronounced at the initial stages of the project launch when the activity does not yet bring tangible profits.

Analyzing the results

Let’s see how the calculation looks at the example of the financial plan of the project.

For calculation, we use revenue indicators (expected and for the previous period), an indicator of the number of assets, the amount of liabilities in the planning period (for example, accounts receivable), the profitability of sales, and expected profit growth.

There are two known methods for calculating the need for additional financing (PDF): balance sheet and analytical. Only an experienced accountant can thoroughly understand the second method. The balance method uses the same techniques. However, it is much easier to understand and apply it independently: based on the analysis, a series of forecast reports is constructed, which are then combined in two paragraphs on income and expenses.

In fact, we will get an approximate model that cannot be called a serious financial planning document, since the assets and liabilities in this report will probably not converge. However, the difference between these paragraphs will amount to the need for external financing.

Suppose if the cash flow (revenue, revenue from the previous period, subsidization) is 227,000 rubles, and the planned expense (production cost, current payments, equipment purchase) is 219,000 rubles, then it is obvious that the project does not need additional financing.

Final Words

Of course, this is a primitive calculation. In practice, there are more frequent situations where, for example, in the first quarter, the project regularly generates profit, and in the second or third quarter, it gives out negative net cash flow (VAP), reaching the zero level only by the end of the year.