A company’s finance and accounting are essential to ensure its success, and that’s why professionals in this sector are in such high demand. It doesn’t matter if the business idea is brilliant or if there’s hardly any competition in the market — if there isn’t a well-defined, structured, and goal-oriented financial and economic business plan, all the rest will be in vain.
If you agree, keep reading this post where we explain what this plan consists of and the steps to create it.
Although accounting and finance are separated by a fine line and, in most companies, work within the same department, to fully understand what an economic and financial plan is, we first need to distinguish between the two.
While accounting focuses on recording and presenting financial information obtained from a company — ensuring compliance with legal and reporting requirements — finance focuses on managing financial resources, strategic decision-making, and planning to maximize profitability and the company’s future value. In simple terms, accounting looks to the past, while finance focuses on the present and future of the organization.
Now that you can differentiate between accounting and corporate finance, let’s define what a company’s economic and financial plan is: it’s the creation of a document that details the organization’s financial strategy, including projections of income, expenses, investments, and funding sources. This plan is designed to set financial goals, assess project feasibility, and provide a guide for short- and long-term financial management. It also includes tools such as budgets, projected financial statements, and risk analyses to support key financial decision-making.
Every business financial plan must include a few essential variables that determine the achievement of its goals. That’s why, in your financial strategy, you should never forget to include these factors:
Now that you understand the key indicators, it’s time to organize them to shape the example of a financial and economic plan we present below — one you can also use to create your own. Pay close attention!
Clearly identify the financial objectives you want to achieve with the plan, such as revenue growth, profitability, business expansion, etc.
Assess the company’s current financial status. This includes reviewing past financial statements, identifying assets and liabilities, and understanding the current cash position.
Create financial projections for a future period. This involves estimating expected income, expenses, investments, and cash flows. Consider different scenarios, such as optimistic and conservative ones.
Develop a detailed annual budget that breaks down expected income and expenses for the coming year. Make sure it’s realistic and achievable.
Define how you’ll finance operations and projects. This can include equity, loans, investors, and other sources.
Assess how different economic variables (such as cost changes, market demand, etc.) might affect your financial projections.
Set KPIs to measure financial performance, such as profit margin, ROI, inventory turnover, and others.
Detail the investments required to reach your objectives, including cost and potential returns.
Identify financial risks and establish strategies to mitigate or address them.
Set the financial policies that will guide management, such as credit, collection, and investment policies.
Develop a detailed action plan showing how you’ll implement financial strategies over time.
Establish metrics to measure financial performance over time and schedule regular plan reviews to make adjustments if necessary.
Communicate the plan to all stakeholders and obtain commitment from top management and relevant teams.
Implement the plan and continuously monitor it to ensure that objectives are being achieved and make adjustments if necessary.
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