• Nick Richards CIPP/E

Financial Planning Hints & Tips


Financial planning is important because it:

  • Helps you run your business more effectively

  • Speeds up decision making because you have a better understanding of all the implications

  • Helps you avoid or minimise problems

  • Helps you demonstrate tight control to other stakeholders e.g. banks, shareholders

  • Helps you sleep ……………..!


But it has to be “good” planning, not just done for the sake of it


  • Put financial planning and cash-flow planning at the centre of your business

  • Ensure good financial disciplines are in place as standard

Understand your Audience and their needs

  • External – for example bank or venture capitalist or business angel or private investor – they sometimes need different information and approaches, so make sure you understand their objectives

  • Internal – for example internal investors, board, management team or staff – your objectives might be motivational, getting their buy-in, support etc.

  • The Financial Plan needs to look professional and be credible – your audience must believe the financial plan is rigorously prepared and can be achieved

  • If previous financial forecasts have been accurate show them as well as the actuals achieved – this gives third parties confidence in your forecasting ability

  • It’s important to understand what you are trying to achieve

  • Trying to estimate your Funding requirement?

  • Return on investment calculations?

  • Planning in order to obtain a company valuation?

Time Periods

  • Try to project for to 5 years if possible but it might be less depending on your audience and circumstances

  • Forecast by month ideally

  • Include historical data if available, to set the scene for the forecast. Historical data is your starting point for key assumptions

  • Spend time making sure the key assumptions are realistic


Where to start?

  • Identify all the material headings you need to forecast

  • It makes life easier if you forecast using the same headings as used in management accounts

  • Bundle some smaller headings together

  • Make simple assumptions initially (refine later) and build the model logic – this is critical to let Excel do the work; try not to hard code all data, use formulae and create linkages ….

  • Don’t forget to include VAT, Corporation Tax, Dividends – they all affect cash!

  • Balance Sheet – forecast fixed assets, debtors etc. Cash will be the balancing number


Record your major assumptions -


  • Make sure your assumptions are recorded and are realistic. Poor assumptions = poor forecast so research them and make sure they are reasonable

  • Continually review and revise as you get better information, and improve the logic of how important data is calculated

Key Metrics

  • Include a dashboard so you can easily see Key Performance Indicators (KPI’s) important to your business e.g.

- Change in order book each month - Percentage increase in sales each month - Change in cash balances forecast each month - Increase/(decrease) in working capital requirement


  • Consider using graphs to summarise important data – it’s easier for people to understand

  • Trend data important – are the trends getting better/worse?

  • If worse – decide what you are going to do about it ……

Other tips


  • Prepare a “Base Case” model that you feel is realistic

  • Spending time thinking will help you understand the dependencies

  • Learn from the process, prioritise areas of importance

  • You can make business decisions with more confidence

  • Once the Base Case is fixed then flex some key sensitivities to see what effect they have on say your Funding Requirement e.g.:

  • Sales are reduced by 20% or delayed by 3 months

  • Debtor days increase from 30 days to 45 days

  • Rent review 25% higher than you hoped

  • Pick sensitivities relevant to your business

  • Financial planning is critically important

  • It’s not just for the bank, it helps you run the business!

  • Don’t kid yourself, it has to be credible

  • Helps you sleep at night – you have control

  • Don’t treat this exercise as one-off, update it regularly and learn from the corrections you’ve had to make

  • Takes time to set up but not long to update each month

  • Adopt an approach of continual improvement

  • Others can help, but the owner/CEO/FD must take responsibility


John Panczak MA (Cantab) ACA


If you need any help with these or any other business-related issues please get in touch



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