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Business Plans | 01 September, 2023

The Impact of a Robust Financial Plan in a Business Plan

Businesses create both short and long-term goals that are achieved through tactical and comprehensive strategies. An integral piece of these strategies involves a solid financial plan that provides a complete view and understanding of a business’s history, development, and future objectives.


What is a Financial Plan?

A financial plan unfolds an extensive model of a business’s present financial circumstances, financial goals, and effective plans made to reach those goals. It details an organization’s financial evolution and serves as a guide to day-to-day business decision-making. This includes financial information in a business plan, such as income and spending, debt and investments, and cash flow. The financial aspects of business plans provide data on the overall financial well-being and sustainability of a business.


What is Financial Planning in Business?

A financial plan is vital in driving business growth and success. A well-crafted business plan integrates financial planning that assesses a business’s financial situation and aligns with its financial goals. A business’s purpose will set the tone for its financial goals, while the financial plan guides and tracks a business’s progress towards these goals.


5 Reasons Why a Financial Plan is Vital in a Business Plan

A business’s viability and profitability are expounded through the financial section of a business plan. An elaborate financial plan is crucial in a business plan for several reasons:


Assists in and Enhances Financial Decision-Making: A financial plan provides a blueprint for managing the financial aspects of a business. It contributes to making informed decisions on budgeting, spending and investing, and ensuring that financial resources are wisely allocated and utilized. Through clear business goals and strategies, informed and better decisions are made.  


Ensures Financial Viability: As businesses seek profitability and sustainability, a financial plan helps in the assessment of a business’s financial viability through estimating revenues, expenses, and potential profits. In addition, a well-executed financial plan zeroes in on probable financial risks and challenges in their early stages, providing businesses a path to address these risks head on.


Attracts Funding: Investors and lenders probe into the details of a financial plan to assess the potential return on investment and risk levels. A plan that showcases meticulously thought out financial aspects of a business, constitutes a well-structured financial plan that will increase a business’s credibility. In turn, established credibility allows a business to secure funding.


Defines and Sets Financial Goals: A financial plan establishes clear financial objectives and breakthroughs. It interprets a picture of business success through financial data that will serve as a basis to track progress, tailoring necessary business strategies, and executing financial business plans.


Mitigates Risk: Financial projections and financial analysis in business plans aid businesses in identifying and reducing potential financial risks. A financial plan allows the development of contingency plans in anticipation of different scenarios, such as market changes, unforeseen expenses, or demand fluctuations.



How to Make a Financial Plan

A financial plan in business plans includes several main components for the effective management and projection of financial aspects of a business. An outline of the key components of an extensive financial plan is shown below:  


Revenue Forecast

The revenue forecast approximates the sales a business expects to gain over a specific time frame and how said revenue will be generated. A business’s revenue stream may vary depending on its business purpose, goals, and objectives. These projections should be realistic and based on market research and/or historical data. The revenue forecast is the foundation of other financial projections. Hence, it is a critical part to the effectiveness of a financial plan.  


Financial Statements

Financial statements in business plans provide a detailed view of the financial stability and performance of a business. Through accurate financial information, stakeholders, including investors, lenders, potential business partners, ascertain the intricacies of the financial aspects of a business. The main financial statements in a financial plan are:


Income Statement (Profit or Loss Statement): The income statement summarizes a business’s revenues and expenses for an exact period and is typically presented through monthly, quarterly or yearly schedules. This further details the revenue, cost of goods sold (COGS), gross profit, operating expenses, interest, taxes, and net profit of a business. The income statement shows insights into a business’s profitability, indicating its ability to generate or lose money through a net profit or net loss.


Balance Sheet (Statement of Financial Position): The balance sheet demonstrates a business’s financial position at the end of a reporting period or at a specific point in time. This includes data on a business’s assets, liabilities, financing sources, and equity. Among others, the balance sheet explains the sufficiency of a business’s assets to assist in expansion and its financing decisions for operational activities. Overall, this serves as an indicator for stakeholders on how a business utilizes its financial resources.  


Cash Flow Statement: To evaluate a business’s liquidity and cash management, the cash flow statement monitors the inflow and outflow of cash over a specific period of time. This statement has three main parts: cash from operating activities, investing activities, and financing activities.


Financial Projections

Aside from historical financial statements, a financial plan should include financial data that approximates future periods, at three to five years forward. These financial statements for future years will aid in illustrating financial trajectory and potential business growth.  


Funding and Contingency Plans

A financial plan should include a portion that details its funding necessities, such as capital to be required, how these funds will be used, and how and from where these funds will be sourced. Furthermore, a business must anticipate market fluctuations and prepare for various business scenarios. Contingency plans such as cash reserves are to be considered during off-peak seasons or even during economic changes.


The elements mentioned above form a financial plan template that will be of help in growing and monitoring the progress of a business. A financial plan largely impacts a business plan since it verifies a business’s resilience and overall financial health, aids in securing funding, improves decision-making, sets realistic targets, and assists in anticipating and reducing financial risks. With a comprehensive financial plan, a business can foresee its direction and tailor its strategies to adapt to the ever-changing and competitive business environment.


Ensure Business Growth Through a Compelling Financial Plan

A complete financial plan aims to realize a business’s future prospects through clear and effective strategies. Download our free business plan template, which includes a sample financial plan and tips on creating a solid financial plan. A detailed financial plan in a business plan can be crafted independently or through the expertise of a professional business plan writer. 


Prepare for your business’s future growth and success—reach out to BSBCON today. 

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