Financial planning: keys, importance and tools FOR EFFICIENCY

Financial planning is an essential practice for companies because it allows you to achieve a higher cash flow performance in the medium and long term, and thus, establish better strategies for sustainable and scalable growth for your operations.

It is also a substantial element for decision making, which is a daily task within any organization and has a direct impact on results.

Learn about the keys to financial planning, why it is important and how you can make it more efficient.

Importance of financial planning in your company

Efficient financial planning is the basis for adjusting the processes within a company in terms of actions and decision making to make the best use of economic resources.

It is also key to:

Better business opportunities

Being aware of what is happening in a business and choosing to do the right thing on a daily basis is crucial to avoid wasting opportunities.

Customers and suppliers need to receive the right information at the right time to make a decision about an organization.

Cash flow optimization

Having certainty about what will be sold in a certain period of time, the gross margin of each sale, when the money will be received, how much and when suppliers have to be paid, among other elements, will allow to be prepared and to have enough money for what has to be done in the short and medium term.

Visualization of the company's future

Likewise, financial planning allows you to have an idea of what your company may become in the short and medium term.

In the case of the long term, temporary elements must be considered, i.e., estimating how likely it is that processes or issues will change and actions planned at the beginning must be implemented.

Other advantages of having a good financial planning are:

• Cost reduction by generating a direct impact on the profit margin.
• Improved qualification with suppliers to access discounts, increased credit days and more.
• Acceleration of digital transformation by knowing relevant financial data and implementing tools to visualize cash flow in real-time.
• Simpler and more effective processes based on systems that help close financial statements at the beginning of each month.
• Greater control of financial indicators to have access to preferential credit lines.

Now that you know these facts, let's look at the elements that make up financial planning.

The 5 keys to financial planning

At London Consulting Group, we know that having a good financial control is crucial for business, therefore, we have a proven process, which stands out for its comprehensive approach and the ability to adapt to the needs of each company.

It consists of:

1. Macro conceptual model

The starting point for financial planning is to have a well-defined accounting structure and balance sheet.

To this end, costs, accounts, subaccounts and a detailed matrix must be considered to help achieve efficient management.

Currently, there are ERP type information systems that help to generate balance sheets and financial statements, in order to be able to evaluate data from different dimensions.

2. Commercial processes

Our methodology considers the need for a business process model, including payment types, discount and credit time control policies, agile credit scoring model to quickly evaluate, RPA systems for reduced response times, etc.

These elements will help to have an efficient credit release mechanics and the recovery of money will be faster.

Likewise, having a collection system that adjusts to the behavior of the clients is crucial for the collection work to be effective.

3. Payment orders

Regarding payments, London Consulting Group's process establishes clear strategies and criteria for supplier relationship management.

There must be a clear strategy on payment days to plan them properly and measure the DPO (Days Payable Outstanding).

Having a good parameterization of the ERP type system is essential for the planning, administration and execution of payments. Likewise, the process of reimbursement to suppliers must be agile and automatic. It should automatically generate reports to load payments or send payment vouchers to the suppliers.

The automation of processes within a company is very important in financial planning.

4. Cash flow control

Cash-cutting and closing processes must be established when there are different points of sale. Ideally, this should be done through a system that allows you to see the information in real-time to know the flow that enters each point.

To facilitate this process, the bank reconciliation has to be automatic through the system.

Many companies work with different banking entities, but this should not be a problem if BI tools are used to help standardize how all the banking information of an organization will be displayed, either by bank or consolidated.

5. Management of intercompany relations

Another key point is to identify all the companies that make up the group and that are managed under an intercompany scheme, which have certain benefits for the fact of being inside, either as a customer or supplier.

All of these agreements must be parameterized within the system used by the company and it must be certain that the financial statements and reports accurately reflect these relationships.

BI, the best tools for financial planning

At London Consulting Group, we provide tools to enable good financial planning to help companies implement them in their processes, and we are certain that the best ones are the Business Intelligence (BI).

There are different options to carry out tasks such as:

• Manage cash flow.
• Make projections.
• Generate reports to know the flow on the day.
• Create strategic reports.
• Analyze key indicators such as liquidity, growth and profitability.

It is possible to concentrate the most important data, financially speaking, in a BI tool.

Conclusion

Now that you know what is most important to have good financial planning, it is time for you to implement actions to achieve it.

Do not leave out BI tools, as they offer multiple benefits as long as you start using them in an smart and strategic way.

At London Consulting Group, we can guide and advise you, so that everyone knows how to get the most out of them to achieve scalable and, above all, sustainable growth.