The financial planning process is simply the conscious arrangement of a company’s money strategy – and this happens on many levels. It’s not just about balancing the monthly budget or calculating how much will remain in the account after paying the bills. In a company, the financial planning process is something far more important – it’s the way an enterprise looks into the future and prepares for different potential scenarios.
Imagine it this way: a financial plan is like a map. If you have it, you won’t get lost, and even if a moment of hesitation comes, you always know where to look. Financial planning in business works the same way – you know where you’re heading and what options you have to reach your destination.
The financial planning process includes, among other things:
- setting realistic financial goals,
- budgeting and controlling costs,
- analyzing where the company will get the money to grow,
- forecasting risks and creating contingency plans,
- and making investment decisions based on numbers.
What’s important – this is not a one-time process. It’s something that is monitored regularly and improved or adjusted depending on the needs and the changing environment. This way, the company can constantly adapt to shifting market conditions, inflation, currency exchange rates, or simply the evolving needs of its customers.
Why is this so important? Because the financial planning process not only organizes the budget but, above all, provides certainty of action. A company that plans does not react to crises chaotically – it knows exactly what to do.
And that is essentially the answer to the question of what the financial planning process really is – it’s a tool for making conscious decisions and avoiding costly mistakes.
What does the financial planning process look like?
Now that we know what the financial planning process actually is, it’s worth seeing how it looks in practice.
Most often, the financial planning process goes through several phases.
1. Analysis of the starting situation
First, you need to know where you are. A company begins with an analysis of its finances: revenues, costs, debt, available funds, clients served, or contracts held. This makes it possible to assess the overall condition of the business. Without this, it’s impossible to move forward – how can you plan for the future if you don’t know where you’re starting from?
2. Defining financial goals
The next step is to establish where you’re heading. Goals can vary: increasing revenue or gross margin/EBITDA, expanding into new markets, improving financial liquidity, or investing in new technologies. The important thing is that they are realistic, measurable, and specific.
3. Creating an action plan
This is where it gets interesting – building the strategy. The company plans how it will achieve its goals: what costs it must incur, what investments are necessary, and where to get financing. This is the moment when spreadsheets help visualize what will happen if things turn out differently than expected.
4. Implementing the plan
Planning is one thing, execution is another. In this phase, theory turns into practice. The company puts the budget into action, keeps costs under control, monitors cash flows, and makes adjustments when necessary.
5. Monitoring and updating
Remember, financial planning is a process that needs constant updating. Market conditions change, new opportunities and risks appear, and the company must respond. That’s why monitoring results and adjusting the plan on an ongoing basis is so important.
Methods of financial forecasting
We already know what the financial planning process looks like, so it’s time to dive into the topic that gives it real power – financial forecasting. Because planning can be done in many ways: by intuition, based on past experience, or – and this is the best path – using concrete data and proven methods. Financial forecasting is simply predicting the company’s future in numbers. Here we’re talking about statistics, data analysis, and common sense.
Historical method – you check what revenues, costs, or margins looked like in previous years and assume that the future will be similar. This method works best when the company operates in a stable environment.
Ratio method – here we use various financial ratios, such as profitability, liquidity, or debt levels. With them, we can create models and predict how financial results will change if, for example, raw material costs increase or sales decline.
Scenario analysis – this method involves preparing several scenarios: the best case, the worst case, and the most likely case. Thanks to this, the company knows what to do if revenues grow faster than expected, but also how to protect itself when the market starts to slow down.
Expert method – sometimes it’s worth drawing on the experience of experts – managers, analysts, or financial advisors – because they can combine hard numbers with business intuition and point out directions that spreadsheets alone wouldn’t reveal.
Mathematical and statistical models – more advanced companies use quantitative methods such as regression analysis or ARIMA forecasts. It may sound complicated, but in practice, it’s about algorithms detecting patterns in data and predicting the future with greater precision.
Tools for financial modeling and forecasting in a company
When it comes to the most popular tools for financial modeling and forecasting, these five definitely stand out:
- Excel – still the most commonly used tool, especially in small and medium-sized companies.
- Anaplan – a leader among large organizations, excellent for strategic planning.
- Adaptive Insights (Workday Adaptive Planning) – a popular cloud-based solution for forecasting.
- Power BI– Microsoft’s analytical tool, often used for reporting and visualizing financial forecasts.
- Oracle Hyperion – a classic in large corporations, a highly advanced FP&A system.
Why is the financial planning process necessary?
An important question: does every company really need to go through the financial planning process? The answer is simple: yes.
Why? Because financial planning is above all about control and security. A company that plans knows what is happening with its money, what risks exist, and how they can be minimized. Let’s look at some examples.
1. Stability in uncertain times – inflation, currency exchange rate fluctuations, economic crises, or new tax regulations; with financial planning, you stay prepared.
2. Better investment decisions – when the owner or management sees revenue and cost forecasts clearly laid out, it’s much easier to decide whether a new investment is worth pursuing.
3. Financial liquidity – financial planning helps ensure that the company has money not only for growth but also for day-to-day operations.
4. Trust from investors and partners – companies that can present a consistent and realistic financial plan inspire greater confidence. Investors and banks are much more willing to work with businesses that have a financial planning process, because they see a well-thought-out strategy rather than random actions.
5. Growth and competitive advantage – financial planning is a tool for development. Companies that anticipate trends, analyze data, and respond appropriately move ahead of the competition.
Who needs the financial planning process? Which companies benefit from it?
Attention! Practically everyone uses – and should use – financial planning.
Small businesses and start-ups – in small companies, every mistake costs the most. The lack of a financial plan can mean problems with liquidity, difficulties paying invoices, or no funds for growth. For start-ups, the financial planning process is almost a condition for survival – it helps show investors that a business idea is not just a dream, but backed by concrete numbers.
Medium-sized companies – these businesses are often at the stage where they want to grow – investing in new technologies, hiring more people, or entering new markets. Here, financial planning provides the security that this growth will be stable.
Large corporations – for big organizations, the financial planning process is a standard. Here we’re talking about massive budgets, investments across many countries, and complex financial structures.
Family businesses – we often forget that financial planning is also crucial in family-owned companies. A well-prepared financial planning process helps ensure that the business can survive for years and continue to grow.
Industries sensitive to change – some sectors, such as retail, transport, manufacturing, or IT, particularly need financial planning. Why? Because they are highly dependent on changing costs (e.g., fuel, raw materials), exchange rates, or market trends.
What role does a company like ours, Incro, play in this?
In the end, it’s worth looking at the financial planning process from a practical perspective and asking ourselves: who can make this entire puzzle meaningful and truly translate into business growth?
The truth is that many business owners or managers focus mainly on developing sales, acquiring customers, or creating new products, while financial matters remain somewhere in the background. Yet it is finances that are the foundation, without which even the most exciting idea will not last long.
And this is where Incro comes in. Thanks to our experience and expertise, we can look at a company’s situation objectively, point out its strengths and weaknesses, prepare realistic forecasts, and help implement them in practice.
The financial planning process is not something that can be done in your spare time or postponed until later. A company that tries to handle it on its own often falls into the trap of overly optimistic assumptions or simply gets lost in the maze of data and scenarios.
At Incro, we provide entrepreneurs with more than just spreadsheets or reports – we offer peace of mind and security. With the support of our experts, a business owner can focus on what they do best – developing their company – knowing that financial matters are under control and based on solid forecasts.
The financial planning process is not just a set of numbers and spreadsheets, but above all, a strategic tool that enables any company – small, medium, or large – to operate with greater confidence, grow more steadily, and avoid costly mistakes. It is a process that starts with analyzing the current situation, goes through setting goals and creating plans, and continues with implementation and ongoing monitoring.
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