Financial planning in a company deals with the systematic recording, forecasting and management of all cash flows and capital structures of a company. To draw up the financial plan, you use data from the past to predict future developments. This shows whether a liquidity surplus or capital requirement is to be expected in the coming years. Whether you have equity for investments or are seeking external financing has a significant influence on your company’s business strategy.

  • Ensure liquidity: You should always have sufficient income and assets to cover your fixed costs and meet your payment obligations.
  • Plan budgets and investments: Clarify how much money you need to achieve your business goals and where the money should come from. This will give you a sound basis for making decisions on budgets and investments.
  • Increase profitability: Financial planning helps to increase your profit and reduce capital employed and costs to improve the profitability of your business.
  • Minimize risks: By regularly controlling key financial figures, you can recognize cost increases, sales slumps and upcoming payments at an early stage. Always calculate reserves in order to be prepared for liquidity bottlenecks.
  • Create confidence: With well thought-out financial planning, you prove that you can handle money competently. This increases your creditworthiness with banks and strengthens the trust of your employees and stakeholders.

Goals of financial planning

The tasks of financial planning can be divided into different phases:

The first step is to record all assets and liabilities as well as the income and expenditure of your company, which are also reflected in the annual financial statements. By gaining an overview of the current financial situation, you can derive cash flow forecasts, assess liquidity and scrutinize existing financing (e.g. loans, equity).

In the central phase of financial planning, you use the data obtained from the analysis phase to create your financial plan with foresight. This can be divided into several areas:

  • Revenue planning: How will your revenue develop and how can sales be increased?
  • Cost planning: Which fixed and variable costs are incurred and which can you reduce?
  • Profitability forecast: How much turnover do you need to generate for your company to be profitable?
  • Investment planning: What purchases do you want to make and where is your money well invested?
  • Liquidity planning: How do you ensure your company’s solvency?
  • Capital requirement planning: How much capital does your company need for operations and investments?
  • Financing planning: Where will the money come from (equity or borrowed capital)?

As soon as the strategic financial planning is complete, the operational part begins - theory becomes practice. If you have opted for external financing, you will, for example, talk to banks, take out loans, apply for subsidies or raise capital in other ways. To keep track of your cash flows, you will need to organize account management, invoicing and bookkeeping. Last but not least, you will also initiate investments.

Regular controlling of key financial figures is essential in order to identify deviations from the plan (e.g. too high expenditure, too low turnover) and initiate countermeasures at an early stage. To do this, you must analyze the causes and, if necessary, take new developments (e.g. market changes) into account for your short-term and long-term financial planning.

Phases of financial planning

Financial planning is an ongoing process that is repeated regularly. Depending on the planning horizon, you undertake short-term financial planning (up to 1 year), medium-term financial planning (1 to 2 years) or long-term financial planning (2 to 5 years).

Short-term financial planning generally relates to the coming year and precedes the determination of budgets for the individual company divisions. Conventionally, the annual financial statements are used to derive forecasts for the expected financial scope. In the start-up phase and for smaller companies, however, you should review the balance sheets at least every month.

This goes hand in hand with liquidity management in particular: especially when you want to start a business, the question arises: is the available money sufficient to cover current expenses month after month? Continuous monitoring of cash flow and reacting to unexpected shortages are particularly important for short-term financial planning.

Short-term financial planning

Medium-term financial planning is mainly concerned with investments and their financing. For example, what financial resources are required for new machinery, IT systems or buildings to enable growth and expansion in the future? Can you afford the investments and when will they pay off?

In medium-term financial planning, you forecast the development of turnover, costs and profits over several years. Only with this multi-year financial planning can you decide whether you can finance planned purchases from your own funds or only with the help of external financing. If you want to make financial planning for a project easier, it is best to use a template for your project management .

Long-term financial planning is closely linked to the overarching strategy that positions the company competitively for the future and thus ensures its continued existence. This includes, for example, tapping into new markets, developing new products, converting production to renewable energies or digital transformation. This is why strategic financial planning sometimes involves significant investments that need to be financially secure.

Scenario analyses help you to plan growth rates, profits and the increase in company value in the long term. In doing so, you play through how market changes, interest rate rises, declining demand, etc. would affect the company. On the international stage, geopolitical and regulatory risks such as customs duties, sanctions or supply bottlenecks also play a role.

Uncertainty is greatest in the start-up phase. There are no reliable sales figures yet and resources are usually limited. External financing is often necessary without being able to reliably predict whether the business model will really work and cover the costs. Good financial planning for your start-up helps to manage these risks.

At the beginning, the focus is primarily on these questions:

  • Business plan: Is your business idea economically viable and does it stand out from the competition on the market?
  • Capital requirement planning: What do you need for the start-up (e.g. equipment, personnel, marketing)?
  • Financing planning: Where will the money come from (equity, bank loans, subsidies, investors)?
  • Liquidity planning: How long will the available money last to cover current expenses?
  • Profitability forecast: What turnover is realistic - and when will the company become profitable?

The break-even point is also particularly interesting for financial planning in a start-up: In which year would you like to break even? As soon as you record annual surpluses, you should reduce your dependency on financial backers (e.g. banks, investors) and build up reserves for times of crisis. Succession planning or sales are also relevant for start-ups: What happens when the founders leave?

Financial planning when founding a company

  • Especially if you want to start a company and are looking for investors, your financial planning must be sound and coherent. A lack of plausibility and incomprehensible figures will make banks and investors less willing to provide capital for your project.
  • Without a basic understanding of financial instruments and key figures, successful financial planning for your company is hardly possible. Depending on its size and structure, financial planning for your project can be difficult to calculate. A lack of expertise, for example, can lead to you underestimating capital requirements and costs.
  • As your forecasts are largely based on assumptions about the future, unexpected problems and misjudgements can always arise. The financial situation of your company depends heavily on external factors such as market changes and political decisions that you can hardly influence - for example, rising interest rates, customs duties or raw material prices.
  • If you have already done short-term and long-term financial planning for your company several times, you will know that the actual figures almost always deviate from the plans you have drawn up. Especially when unforeseeable events occur, a financial plan that is too rigid restricts your company’s room for maneuver. Flexibility is then required.
  • Multi-year financial planning can tempt you to simply adopt plans from previous years without taking new trends into account and questioning the benefits of existing expenditure. However, you should analyze the market each time and not assume that positive developments will continue without your intervention.

Pitfalls in financial planning

To minimize the likelihood of your company getting into financial difficulties, we have these tips for your financial planning:

  • Realistic scenarios: Create your financial plan based on realistic assumptions - neither too optimistic with sales nor too conservative with costs. Also prepare for various scenarios, e.g. slumps in sales, delivery problems or unforeseen expenses.
  • Liquidity has top priority: your solvency is essential for the continued existence of your company. To avoid the threat of insolvency even in bad times, you should build up a liquidity buffer and only make investments if they are covered.
  • Evaluate KPIs: You should understand, regularly calculate and compare meaningful financial indicators such as the liquidity ratio, the equity ratio or the break-even point. This provides information on how well your company is doing financially.
  • Question investments: Always analyze the costs and benefits of an investment. Does it really bring a positive cash flow or a long-term advantage? How long will it take to amortize? Only invest if it makes economic sense and is financially viable.
  • Consult experts: Financial planning quickly becomes so complex that it is no longer comprehensible to laypeople. In this case, you should consult external tax and business consultants you trust. It is also advisable for founders in particular to network with other founders and seek help from start-up centers.
  • Digital tools: Use powerful software that allows you to keep an eye on your finances and automate processes. There are now numerous digital tools that make your financial planning much easier.

Many companies try to map their financial planning in [Excel spreadsheets](/excel-alternative/. Complicated formulas and limited options for recording and visualizing different types of data make life difficult. Use the intuitive no-code database SeaTable, in which you can store not only figures and text but also images and files. With the help of simple formulas and statistics, but also views and plugins (e.g. galleries, calendars, Kanban boards), you can evaluate and visualize your data in no time at all.

For start-ups in particular, professional financial management software often means high costs before any revenue flows in. It’s a good thing that SeaTable is infinitely scalable! Start with the free version , which already offers you all the basic functions, and only pay for upgrades if you need more storage space, features or user accounts. SeaTable grows with your requirements and your team.

The GDPR-compliant data protection is also not to be neglected: If you use the SeaTable Cloud for your online financial planning, your data is stored in secure German data centers and protected from being passed on to servers in the USA and other countries. You also have the choice of whether you prefer the convenience and scalability of the cloud - or full data sovereignty by installing SeaTable Server on-premises.

Whether you’re an established company or a start-up, financial planning with sound figures demonstrates professionalism and foresight. It gives you orientation, prevents surprises and strengthens the trust of investors, employees and business partners. Especially in the start-up phase, it often determines the long-term success or premature failure of your company.

Optimize your financial planning with SeaTable by clearly preparing all figures, data and facts. Because only those who have their finances under control can guarantee economic stability, react to future developments and make use of the scope for creativity.

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What is the definition of financial planning?

Financial planning deals with the systematic recording, forecasting and management of all cash flows and capital structures of a company. This involves using data from the past to predict future developments.

What are the objectives of financial planning?

The main objectives of financial planning are to ensure liquidity and creditworthiness, to assess and finance investments and to increase profitability and crisis resilience.

What does financial planning involve?

The tasks of financial planning include sales, cost, capital requirements, liquidity, investment and financing planning.

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