Determining Your Financial Plan

Determining Your Financial Plan

Having a financial plan for your business differs from just looking over your financial statements. Instead of looking at what’s already happened, a financial plan makes projections for the coming months, forecasting income and outlays, says BDC, the bank for Canadian Entrepreneurs.

A financial plan provides a tool for monitoring the finances of a business, allowing owners to gauge progress and quickly head off trouble, states information provided by BDC. It helps plan for cash flow dips, identify financial needs and pinpoint the best timing for projects.

“You need a financial plan for your business to help you determine what your future financials will be, based on your business and business plan,” says Karen Fischer, partner, RK Fischer & Associates. “The financial plan is one piece of a business plan and the two need to be in sync. To get to this you need to define your strategic direction and what your financial as well as other overall business goals are for three to five years. This helps you determine what you need to do to hit the numbers that you are forecasting.”

A financial plan needs to make sense based on what you need to get done in the next three to five years, states Fischer.

“A financial plan is a projection of your financials taking into account all business assumptions for your business,” says Fischer. “A financial plan cannot be done in isolation without having some idea of how you are going to get to the numbers. A business plan is the implementation plan of your strategy; your goals and objectives for three to five years.”

A financial plan includes the following components, says Fischer:

  • Summary outlining the key findings of the financials overall and general assumptions, including what needs to get done to improve the current findings
  • Analysis of past financials (three to five years)
  • Inventory
  • Break-even analysis
  • Projected income statements (three to five years out) (first year should be by months, subsequent quarters)
  • Projected balance sheet statements (three to five years out)
  • Project cash flow statements
  • Financial ratios

A business plan includes the following components, says Fischer:

  • Executive summary – overview of the entire plan
  • Company Summary
  • Products and services summary
  • Market analysis
  • Marketing and sales strategy
  • Management and personnel strategy
  • Operational strategy
  • Financial strategy

Whether to create your own financial plan or get outside help is very dependent on the skills of the business owner and whether they are a numbers person, says Fischer.

“In many cases, I find they should get the help of their accountant or a business consultant that has a focus in this area,” says Fischer.

RK Fischer and Associates, which has been in business for 13.5 years, focuses on small businesses with a focus on strategic consulting. Fischer notes that a complete business plan, including the financial plan, will be required if you are applying for grants or loans, looking for investors, are looking to acquire a business, or are looking to be purchased.

“Every business needs to set a strategic direction, usually get financing at one time or another, and needs a business plan,” says Fischer. “There is no difference in whether it is a construction company, carwash, convenience store, retail, or manufacturing; the business owner should know their business and what assumptions need to be made, such as seasonality, work hours, how many employees are available at what times, etc. The goal is to help them manage their finances and understand what they need to measure and look out for in their specific business in order to increase their revenues and reduce expenses wherever possible.”


BDC offers the following six steps to create a financial plan:

1 | Review your strategic plan: Financial planning should start with your company’s strategic plan, thinking about what you want to accomplish at the start of a new year and determining the financial impact in the next 12 months, including spending on major projects.

2 | Develop financial projections: Create monthly projections by recording anticipated income based on sales forecasts and anticipated expenses. Then, plug in the costs for projects identified in the previous step. It may be a good idea to seek advice from your accountant when developing your financial projections.

3 | Arrange financing: Use your financial projections to determine your financing needs. Well prepared projections will help reassure bankers that your financial management is solid.

4 | Plan for contingencies: What would you do if your finances suddenly deteriorated? It’s a good idea to have emergency sources of money before you need them. Possibilities include maintaining a cash reserve or keeping lots of room on your line of credit.

5 | Monitor: Through the year, compare actual results with your projections to see if you’re on target or need to adjust. Monitoring helps you spot financial problems before they get out of hand.

6 | Get help: If you lack expertise, consider hiring an expert to help you put together your financial plan.

Karen Fischer runs monthly webinars on business planning for small business and can be contacted at

A free financial plan template is available from BDC at

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