Financial plan


The financial plan is a document that contains the economic objectives of a person (natural or legal), as well as the strategies to achieve these goals.

That is, a financial plan defines how to achieve a certain amount of savings and / or earnings. This, starting from an initial point and in a certain investment period.

The financial plan, as we will explain later, takes into account the current situation of the individual or company, as well as future projections. This, always based on objective elements for the estimates.

Steps of a financial plan

The steps of a financial plan are:

  • Quantify equity: This involves collecting information from:
    • Assets: These are all the resources that are expected to generate a future benefit, such as real and personal property, and even accounts receivable.
    • Liabilities: They are debts or obligations that will produce a future expenditure, such as bank loans of a different nature: credit card, working capital, mortgage credit, among others.

By subtracting the assets minus the liabilities, we obtain the equity.

  • Estimate the cash flow: The expected income for the firm in the future must be projected.
    • Future income: Estimated sales depend. This analysis must have an objective basis, such as historical information on the company and market data (sector growth). Likewise, if we refer to an individual and his income is not stable, an average of the last months can be calculated.
    • Future expenses: The agent must collect information on the debts and obligations that are pending. These generate installments to be paid in the future that imply a cash outflow.
  • Define objectives: Goals must be set. For one person, for example, they may set a savings goal for their children's higher education. Equally, it is important that you think of a plan for your retirement.

Keys to the financial plan

Some keys to the financial plan are:

  • It allows to evaluate the viability of a business or investment project.
  • It must take into account the level of risk aversion of the economic agent, defining on the basis of this the investment, saving and / or financing decisions that it will choose.
  • The interests of the individual or company must be considered. It may be, for example, that the company is committed to developing an environmentally friendly business, even though it is not the most profitable alternative (at least in the short term).
  • Another important element is the investment horizon. The longer it is, the more difficult it will be to make an accurate projection.
  • You can work with different scenarios. For example, three: optimistic, moderate, pessimistic. In this way, you can even define a contingency plan in the event of a worst-case scenario.
Financial cash flow

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