Create a Finance Business Plan in 7 Easy Steps 

March 22, 2024
13 Minutes
Modified on:
March 22, 2024
Written by:
Swati Bucha
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A business finance plan is integral to keeping the business on track as the company grows, especially if new challenges or unexpected crises occur. Business financial planning overlooks the economic section of your business plan. It utilizes real financial data and projections to put the rest of the business plan in context. 

A business plan emphasizes your plan to do the business for a specific period. It is all conceptual until you start filling in the numbers and data. A business finance plan justifies your good figures, key to impressing your investors or getting a bank loan. 

If you haven't done business financial planning before, you might come up with some roadblocks. Nonetheless, this guide is here to help you out in how to create a business finance plan. 

What is a Finance Business Plan?

A financial business plan is a document businesses use to specify and accomplish their finances. It helps the organization to allocate resources and make crucial decisions efficiently. It encompasses various aspects such as determining prices, business expansion, operations optimization, etc.

A well-designed financial plan helps you confidently conduct business and understand how to allocate resources effectively. Creating a financial business plan is essential because it helps your business determine its current position and make conscious decisions regarding resource allocation. 

The finance business plan represents the business’ existing financial position. It also means a business’s goals, strategies, and financial projections for the business plan. Moreover, it supervises a particular business’ financial well-being as it develops. Finance business plans can be adapted over time, substituting forecasts with practical outcomes and market trends.

A financial tool demonstrates how your organization handles expenses and generates revenues. You must determine how much capital it aims to invest in a financial tool. The corresponding budget must consider the cost of deploying software, maintenance, and upgrade fees.

Why is a Finance Business Plan Important?

Creating a finance business plan is indispensable to ensure long-term business success. Let's look at why a finance plan is important for a business: 

1. Set Clear Company Goals.

A finance business plan clarifies and communicates your business goals to your employees. It helps you direct your efforts properly by informing you of the milestones you must attain by the quarter’s end.

2. Make Precise Forecasts.

Creating a finance business plan informs you of various outcomes your business may face if it employs multiple strategies.

3. Handle Expense Management. 

It helps you analyze how to reduce costs by changing current and future operations.

4. Help Businesses Generate Revenue.

A detailed analysis helps a business identify its strengths and weaknesses. Consequently, it can implement better strategies to generate more revenue.

5. Allocate Resources Effectively.

A finance business plan helps a business determine how to allocate a budget for human resources, marketing, production, and unforeseen crises. Consequently, it helps it effectively focus on its operations.

6. Prepare a Risk Mitigation Plan.

A financial business plan assists the company in preventing risks and staying protected against financial fraud.

7. Assist in Getting Fundraising.

The insights from a finance business plan help you attract better investors and fundraisers quickly.

8. Track the Business Cash Flow.

It helps determine the tolerable level of expense you can spend. It also suggests how to plan to remain on track even after expending the initial funds.

Major Components of a Financial Business Plan

Several components of a financial business plan make it more effective. The following components make up an effective finance business plan:

1. Sales Forecast 

Your business must estimate its sales revenue monthly, quarterly, and yearly. Forecasting patterns in the sales cycles helps your business plan growth strategies and marketing initiatives.

2. Expense Budget

Allocating a budget helps your business stay financially prepared by allowing you to reduce expenses, increase sales, and obtain financial assistance.

3. Profit and Loss Forecast

This component of a financial plan's balance sheet provides a more comprehensive view of your business’s performance over a particular time frame.

4. Cash Flow Forecast

With annual cash flow projections, your business can stay ahead of any financial challenges or struggles.

5. Income Statement

It demonstrates a company’s revenue resources and different items of expenses.

6. Balance Sheet

It provides a detailed overview of your business’s financial health and position on any particular day.

Steps to Create a Finance Business Plan

A successful financial business plan requires intensive planning and meticulous implementation. Below are the steps to ensure that the plan you create helps you achieve your business objectives.

1. Prepare a Strategy.

You can begin creating a financial business plan by listing the critical objectives. To ensure proper guidance, you can incorporate short-term and long-term goals, like buying new equipment or hiring additional staff. 

A strategic financial business plan emphasizes the resources a company requires to accomplish its goals. This process also involves preparing a list of current assets and expenses and determining whether the company needs to acquire more equipment or recruit additional staff. The strategy must align with how business goals impact cash flow.

2. Set up Financial Projections.

Source: Bplans 

A business can begin creating financial projections for its business plan using sales forecasts and predicted expenses. Financial projections assist organizations in determining the anticipated success of a new service or product. These projections focus on the business objectives and predict the costs required to attain them in various scenarios. You can consider the following types of financial projections.

  • Operating business projections
  • Cash flow projections
  • Capital budgeting projections
  • Cost projections
  • Sale of company projections
  • Treasury projections
  • Pension plan cash flow projections

Accountants may have to evaluate the finance business with their shareholders and advise lenders and investors on ways to illustrate the plan.

3. Plan Worst-Case Scenarios.

A business’s financial plans should account for worst-case scenarios, such as when cash inflow decreases or the business encounters an unexpected move. To handle such scenarios, a business must use data acquired from the balance sheet and cash flow statement. Some widespread contingencies include maintaining cash reserves or a considerable line of credit for swiftly accessing funds during dawdling periods.

4. Analyze Your Goals.

Before finalizing a business plan, your company must compare its goals with the actual outcomes specified in the income projections, cash flow statement, and pertinent business metrics throughout the year. This approach helps monitor how closely practical results align with projections. Regularly conducting this comparison allows businesses to identify potential problems before they severely impact revenue and ultimately make required corrections.

5. Select a Financial Planning Tool.

Selecting an appropriate financial planning tool streamlines and accelerates the process of creating a finance business plan. Such a tool guides the business in developing precise financial forecasts. Here is the list of widely used financial tools:

  • Document360
  • Mint 
  • Personal Capital 
  • Future Advisor 
  • Money Dashboard. 

How Can You Choose a Financial Tool to Simplify the Development Process?

You can consider the following aspects while choosing a financial tool:

  1. Security

If access is unrestricted, employees find it easier to accomplish their tasks efficiently. Hence, you require a finance tool that helps you to control who can access what in an organization.

  1. Scalability:

Using a finance tool that grows with your business is imperative. It should be able to accommodate all your requirements as your business grows. Remember that migrating the corresponding data into another system would be challenging once you invest your money and time in a finance tool.

  1. Cloud or On-Premise:

You must determine whether you want a cloud or an on-premise application. Both have their benefits. Usually, a cloud-based system provides you access anytime and anywhere. Your data is always backed into a cloud financial management system. Moreover, the upfront costs are lower. Conversely, on-premise systems are comparatively expensive. However, your data gets locally hosted, so you need full control.

  1. Budget:

Your business must determine how much it intends to invest in a financial tool. The budget must consider the cost of deploying the software, employee training costs, maintenance fees, and upgrades.

6. Conduct a What-if or Sensitivity Analysis.

Source: Sensitivity Analysis (

After projecting financials, the next step is to evaluate your business’s assumptions using what-if analysis. It uses various scenarios when projecting finances. Sensitivity analysis evaluates how sensitive the dependent variable is to changes in the value of independent variables. 

What-if and sensitivity analysis are somewhat similar. The what-if approach focuses on what would happen to a model or assumption if the scenario changes. Sensitivity analysis evaluates how financial models will perform if the independent variables are subjected to fluctuations. 

The formula for sensitivity analysis is a financial model in Excel where the analysts identify the key variables for the output formula. Then, the analysts evaluate the output for a different combination of variables. 

There are different methods for sensitivity analysis. One of the simplest mathematical representations of the dependent output formula is 

Z = X2 + Y2

Here’s how you can conduct sensitivity analysis: 

  1. The analyst will design the basic formula that will act as the output formula. Let’s take the NPV (Net Present Value) formula. 

NPV = [cash flow / (1+i)^t] - initial investment

where i = discount rate and t = number of time periods

  1. The next step is to find the variables that must be sensitized as they are fundamental to the output formula. Like the NPV formula in Excel, the cost of capital and initial investment are the independent variables. 
  2. Determine the probable range of independent variables. 
  3. Now, open the Excel sheet, and then put the range of one of the independent variables along the rows and the other set along with the columns. 

7. Monitor and Adapt the Financial Plan.

Regularly monitoring the created finance business plan is vital to ascertain that the assumptions made are relevant. It also assures that the business is moving in the correct direction. A business can supervise its financial plan by using metrics such as new client acquisitions, procurement expenses, gross margin, and net profit.

Final Words

Your business can effectively track and estimate its financials for overall growth by creating a robust finance business plan. Regardless of your business’s size, all businesses must develop such a plan. This process helps you understand your business’s current standing and where it aims to be in the future. Consequently, you can strategize effectively to stay ahead of its competitors and increase revenue. Once an effective finance business plan is framed, it becomes simpler for a business to focus on product manufacturing, outsourcing, and customer engagement.

Bonus: Learn how to become a financial advisor.

Frequently Asked Questions

1. How can a created financial plan align with the business’ expectations and needs?

By asking the following questions, you can ensure that the created financial plan fulfills the business’ expectations and needs:

  • How will the business generate revenue?
  • What resources are required to fulfill the set objectives?
  • What is the business' operating budget?

2. What is the significance of using financial management tools when creating financial planning?

You can streamline the manual process of creating financial plans using financial management tools. They automatically accumulate real-time data, enabling businesses to analyze, report, and forecast operations effectively to improve overall efficiency. Moreover, these tools have user-friendly dashboards and a built-in forecasting tool that helps businesses track development and adapt strategies to achieve and maintain success.

3. Is it necessary to update financial business plans?

Yes, updating a finance business plan increases a business's operational efficiency. Several businesses frame these plans for 3 or 5 years and adapt them yearly. A financial plan needs to be revised if a market encounters a significant shift (like a rise in demand or recession).

4. How can one incorporate uncertainty and potential hazards into their business financial plan?

Businesses can strategize uncertainty by upholding cash reserves and establishing lines of credit to handle periods of increased expenses or reduced profit. To ensure preparedness for potential hazards, a financial business plan should include backup strategies for various possible scenarios, from best-case outcomes to worst-case situations.

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