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The finances and accounting of a company are an essential part of ensuring its success, and that is why professionals in this sector are in such demand. It doesn’t matter if the business idea is brilliant, or if there is barely any competition in the market, if you don’t have a defined, structured, economic and financial business plan with clear objectives, everything else will be of no use.
If you also agree, continue reading this post, where we explain what this plan consists of and the steps to develop it.
Although accounting and finance are separated by a fine line and, in almost all companies, they work within the same department, to fully understand what an economic-financial plan is, we must understand the difference.
While accounting focuses on the recording and presentation of financial information obtained from a company, ensuring compliance with legal and reporting requirements, finance focuses on the management of financial resources, strategic decision making and planning. to maximize profitability and the future value of the company. It could be said that accounting focuses on the past and finance on the present and future of the entity.
Now that you know how to discern between accounting and corporate finance, let’s define what a company’s financial economic plan is: this consists of the preparation of a document that details the organization’s financial strategy, including projections of income, expenses, investments and sources of income financing.
This plan is created for the purpose of establishing financial goals, evaluating the viability of projects and providing guidance for short- and long-term financial management. It also includes tools such as budgets, projected financial statements, and risk analysis to support key financial decision-making.
Every company financial plan must consider essential variables that are decisive for achieving the stated objectives, which is why, in your economic strategy, you cannot forget to add these factors:
Executive Summary: A brief description of the company’s financial objectives and goals.
Analysis of the current situation: a review of the current financial situation of the company, including historical financial statements.
Financial Projections: Detailed estimates of future income, expenses, investments, and cash flows, often for a period of several years.
Budget: A detailed breakdown of income and expenses for a specific period, usually annually.
Financing sources: indication of how the company plans to finance its operations and projects.
Sensitivity and scenario analysis: evaluation of how different economic variables can affect financial projections.
Key performance indicators (KPIs): metrics that will be used to evaluate financial performance, such as profit margin, ROI, and liquidity, among others.
Investment plan: details about planned investments, including cost and expected return.
Risk management: identification and strategies to manage financial risks that the company may face.
Financial policies: description of the policies that govern the company’s financial management, such as credit or investment policies.
Implementation timeline: A detailed action plan showing how financial strategies will be executed.
Evaluation and control: How financial performance will be measured and evaluated over time and what adjustments will be made if necessary.
Understanding and knowing what the key indicators are, it is time to organize them to give shape to the example of an economic-financial plan that we present below and that you can also use to make your own. Pay attention!
Clearly identify the financial objectives you want to achieve with the plan, such as revenue growth, profitability, business expansion, etc.
Evaluate the current financial situation of the company. This includes reviewing past financial statements, identifying assets and liabilities, and understanding the current cash position.
Make financial projections for a future period. This involves estimating expected income, expenses, investments and cash flows. Consider different scenarios, such as one optimistic and one conservative.
Create a detailed annual budget that breaks down your expected income and expenses for the coming year. Make sure it is realistic and achievable.
Define how you will finance operations and projects. This may include equity capital, loans, and investors, among others.
Evaluate how different economic variables (such as changes in costs, market demand, etc.) can affect your financial projections.
Establish KPIs to measure financial performance, such as profit margin, ROI, and inventory turnover, among others.
Detail the investments necessary to achieve your goals, including the cost and possible returns.
Identify financial risks and establish strategies to mitigate or address them.
Establish policies that guide financial management, such as credit, collection, investment policies, etc.
Develop a detailed action plan that shows how you will implement financial strategies over time.
Establish metrics to measure financial performance over time and schedule regular reviews of the plan to make adjustments if necessary.
Communicate the plan to all stakeholders and obtain a commitment from senior management and relevant teams.
Implement the plan and constantly monitor to ensure goals are being met and make adjustments if necessary.
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Cristina Polo Calvo
COPYWRITER
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