What is corporate financial planning?
Corporate financial planning is the process of developing long-term goals for your company and following a strategic plan of action to achieve those goals.
What is the process?
Getting to know you.
The process begins with an overview of your business. A financial planner will need to understand the structure of your business (who are the shareholders, directors, and other key people), number of employees, and the business’s products and services. There’ll be a conversation about your aspirations and goals, and your concerns and perceived limitations.
Assessing the company’s financial position.
This stage can involve creating a clear picture of your financial landscape by looking at key financial statements: your balance sheet, income statement, and cash flow statement.
The balance sheet lists all assets and liabilities, giving a snapshot of a business’s value at a given point in time.
- A company’s assets are anything owned that has a monetary value.
- Liabilities are things like, loans, mortgages, bonds, warranties, and accumulated expenses.
- Liabilities are subtracted from assets to show equity value. The balance sheet shows the value of a business and what it has.
The income statement, also known as a profit and loss (P&L) report, provides a wide-angle view of a business’s activity.
- This report shows revenue, gains and expenses.
- Expenses are subtracted from revenue and gains, giving a clear picture of profitability.
- The income statement shows a business’s trading viability and what it does.
The cash flow statement is about how and when cash moves into and out of the business.
- Non-cash values (for example, bad debts and depreciation) are not included in the cash flow statement, as there’s no actual cash involved.
- This view of the company’s liquidity is important to the planning process.
Your financial situation will help to understand the investment return your business needs to meet future goals.
Building a financial plan
Having the right business insurance in place is a vital part of a sound financial plan. Besides the basic public liability and employment practices liability, there are some other valuable policies available for corporate risk management. Directors’ and Officers’ and corporate legal liability insurance work in tandem to protect the company and key people in the event of a claim or investigation.
Another risk to consider is the potential death or incapacity of a shareholder. Besides the bereavement for a close colleague, the loss of their expertise and equity could be a financial blow to the company. Shareholder protection insurance pays out in the event of a shareholder’s death, providing surviving shareholders with the means to purchase a late colleague’s shares.
Investing in the welfare of employees will add strength and resilience to your company’s financial position. A comprehensive wellbeing package might include group income protection, health insurance, pension schemes beyond the scope of a basic workplace pension, and various other perks that make employees feel valued and fully engaged. High staff retention and low absenteeism can have a positive impact on a company’s bottom line.
A healthy balance of capital in a business provides security against potential problems, such as natural disaster, bad debts, national economic crisis, or loss of a primary supplier or client. It’s also useful to have capital available for the purchase of major assets such as property or machinery.
Corporate financial planning and analysis isn’t a one-off event. It’s an ongoing process which involves a long-term relationship between a company’s key officers and a financial-planning professional. Over the course of the relationship your adviser will periodically review your financial plan with you to ensure that you’re on track to achieve your goals.
You might need to adjust your plan or reorganise your investment portfolio in order to maximise revenue. Regular analysis of your financial statements will give an up-to-date view of your company’s value, profitability, and liquidity. Your adviser will also be able to ensure that your business activity is structured in the most tax-efficient way.
Why use a financial services company?
Even when business is going well everything can change very fast. Protecting your hard-earned money is as important as making it, and planning for the unexpected is the only sure way of protecting your wealth.
Without planning, there’s risk of a lack of focus, vision, metrics and strategy. A financial-services company has access to a wide range of financial products and the expertise to help company directors develop a long-term plan and create a bespoke investment package.
Purchasing corporate financial planning services might seem a little extravagant. If your business is thriving you might wonder how the services of a financial planner could be a viable investment. If your business is struggling you’ll probably shy away from any non-essential spend.
In terms of business sustainability and longevity, corporate financial planning and budgeting is essential.
Should you use a financial planner for corporate financial planning?
An experienced financial planner can provide a more holistic service, nurturing the overall financial health of a company over a long period of time. A financial planner works with a company’s directors to help them to achieve their long-term goals.
To talk to us about corporate financial planning, please don’t hesitate to call our team of experts on 01603 218000.