The economic-financial plan stands out as the largest and most powerful section of the business plan that every company must develop. This is because it is a document that has the necessary data that lets you know whether a company will be profitable or not and, if it is, when it will start generating profits.
It is a tool through which you can have a quantified and realistic view of the business idea and it is the best way to present the business project to potential investors.
What is a financial plan?
The financial plan is a document that is part of a company’s overall business plan and that collects all the quantified and developed information, calculated in euros, from each of the action plans that correspond to each area of the company.
This instrument is qualified as the best tool to analyze both the financial and economic feasibility of a new business project considering different temporal perspectives (short, medium and long term).
If you don’t know what the financial plan is for, you should know that it’s not only very useful for companies that start taking their first steps, but also for companies that want to consolidate and improve their results.
However, the economic and financial plan allows the entrepreneur to estimate whether his project is able to meet the expected expectations, especially those it generates in relation to expected liquidity and profitability. And knowing this relevant information, decisions can be made in a more accurate way so that the company can take its first steps, consolidate, maintain itself and grow at a sustainable and constant pace.
Now that you know the importance of this plan, if you want to know how to develop a business’ economic-financial plan pay attention to the following lines.
How to develop a step-by-step economic-financial plan?
To start developing the financial plan of a business plan you must know where the company is located and where it wants to go. Self-care is the main driver of success.
If you want to develop a company’s financial plan effectively, you should follow these six steps:
- Analyze the current reality of the company and the direction you want to take to reach a specific point.
- That is, you have to determine the financial statements and project it. In this step it is imperative that the expected profits in the future be defined, as well as financial reasons, including leverage, liquidity and profitability, must be defined.
- Determine the necessary funds based on the capital the company needs to consolidate over a five-year period.
- Forecast the availability of capital for a certain period of time., knowing and analyzing all possible options and detailing possible sources of funding for the project.
- Perform a systematized check to properly establish resources while verifying that resources are used correctly.
- Take into account that the project is exposed to multiple external factors that can divert the financial course initially set, so as many solutions as expected and raised assumptions must be presented.
- Set up a compensation system that is based on performance. It would be best to create a system that incentivizes and promotes the competitiveness and productivity of those involved in the organization to achieve the objectives.
With this information you will be able to develop the financial plan of a business without problems. Use all the information we have published about the financial plan and following these six steps you will get a document that will be of great help to you. You can also consult a financial plan model to suit your needs.