INTRODUCTION

Welcome to the official learning partner of Inquiries,

Investigations and Immersion!

This applied track subject in Senior High School

develops critical thinking and problem solving skills
through qualitative and quantitative researches.

For Accountancy, Business and Management Strand,

students will conduct a feasibility study and business
plan, that will be executed eventually as their Business
Enterprise Simulation.

Sincerely,

The Author, 3Is Learning Partner

 ABOUT THE AUTHOR

As a graduate of Bachelor of Science in Accounting

Technology and a completer of Bachelor of
Secondary Education, Mr. Ryan Billie Moran is
literally both a commerce guy and an educator. He
is one of the authors of Fundamentals of
Accountancy, Business and Management 1 and 2
eBooks which were especially made for ABM
SPCians. He also did the Entrepreneurship Learning
Partner (module) that is being used in different
tracks.

Aside from being an accountant and a teacher, he is

also a self-taught graphic and visual artist. He is the
man behind the designs of SPC Senior High
School’s official Facebook page. He is a singer-
songwriter as well.
 Lesson 4

Financial Planning

Learning Objectives

At the end of the lesson, you should be able to:

1. determine the importance of financial planning in business

planning;
2. apply the tips in creating a financial plan to business planning;
and
3. Identify the five key components of financial plan.

https://i0.wp.com/thedailycpa.com/wp-content/uploads/2020/08/shutterstock_661493680.jpg?resize=1440%2C580&ssl=1

The financial section of your business plan determines whether or not your business idea
is viable and will be the focus of any investors who may be attracted to your business idea. The
financial section is composed of four financial statements: the income statement, the cash flow
projection, the balance sheet, and the statement of shareholders' equity.

31
ENGAGEMENT

How much is your weekly allowance?

Do you plan/budget the allowance before spending? Where do you

allocate it? Please give some example.

32
 EXPLORATION

The financial section of your business plan is crucial to recruiting investors and lenders.
• A financial business plan is created by gathering all the components of the business
and expressing them in numbers – both revenue and startup expenses.
• Every business plan needs a cash flow projection. The rest of the plan tells the story
of the business and how the company will execute that plan.
• The cost-volume-profit analysis shows the income or cash flows that occur with
different scenarios of key assumptions, like sales or costs.

Tips for writing the financial section of a business plan.

Jennifer Spaziano, vice president of business development at Accion, emphasizes the
importance of the financial section of your plan.
"This section is crucial if you're presenting your plan to potential lenders or investors, but
it's also important if you're using it in-house as a roadmap to get started and continue to grow,"
Spaziano said.
She added that while you may have the best idea in the world for a business, it may still
need tweaking. However, you won't know until you sit down and work up the numbers.
You can find business plan templates on several websites that allow you to fill in your
business information and download your complete plan. If you've never written a financial
section of a business plan or completed any business planning at all for that matter, here are
four tips that Spaziano suggested:
Follow generally accepted accounting principles. As a rule, the financial part of your
plan should follow these as set by the Federal Accounting Standards Advisory Board,
especially if you're putting it together to get a loan or a line of credit.
Get fluent in spreadsheets. Spreadsheets are the best and most accepted way to
present financial information.
Seek outside assistance. Getting advice from your financial planner or accountant can
help you put the numbers together and present them properly. If you use an accountant
and your financial statements have been audited, state that in the plan.
Look up templates. If you want to attempt writing the financial section on your own,
there are resources.

33
The necessary financial information
Each section of a business plan has its own set of required pertinent information, and the
financial section is no different.
"There are two parts to the financial component of a business plan: historical data and
prospective data," according to Spaziano. "If you're a startup, you obviously won't have any
previous financial information for the company, so many lenders will want to see your personal
financial information in lieu of, or in addition to, your business financials."
Historical data includes items like your balance sheet, cash flow statement, tax returns,
and capital, while prospective data includes details like a projected income statement that will
help lenders and investors understand how you will invest their money.

5 key components of a financial plan

A financial business plan is created by gathering all the components of the business and
expressing them in numbers – both revenue and startup expenses. Your business is selling a
product or service at a specific price point, and the goal is to prove that your business is viable.
The financial plan is where you translate ideas into numbers, according to Rob Stephens,
founder of CFO Perspective.
"You are explaining where you plan on getting cash, what you will spend that cash on to
start the company and what the operating cash flows of the company will be in the first few
years," Stephens said. "Show how lenders and investors will receive a return on their
investment."
Stephens explained the five key components of a financial plan:

Assumptions. Every projection is based on some assumptions. Pick reasonable

assumptions. You don't need to spend much time justifying your assumptions unless
they are critical to the company's success. Use the assumptions area for economic or tax
rates as well as significant numbers like sales that drive other numbers like costs.

Key financial indicators and financial ratios. This highlights what you have
determined to be the most important information for measuring the performance of the
company. This acts almost like an executive summary of the more detailed financial
information that follows.

34
Cash flow projection. Every business plan needs a cash flow projection. The rest of the
plan tells the story of the business and how the company will execute that plan. The cash
flow projection proves whether the plan is going to work. The timing of when to hire staff,
make significant purchases and distribute cash to owners can all be modeled to make
sure your strategy is feasible. You may find that you need to adjust the timing or
amounts of some of your strategies. Not having a projection might cause you to make
decisions or promises that you can't fulfill.

Projected income statements and balance sheets. Cash is king, but standard
accounting income statements and balance sheets show profitability and aspects of the
financial health of the company. Many investors and lenders calculate ratios from the
income statement and balance sheet to determine whether to give money to the
company.

Break-even analysis or cost-volume-profit analysis. Everything presented above is

for one scenario of outcomes. Everyone knows that it's a collection of guesses, many of
which will not come true. The cost-volume-profit analysis shows the income or cash
flows that occur with different scenarios of key assumptions, like sales or costs.

35
 EXPLANATION

LESSON 4: Financial Planning

Name: Score:
Section: Date:

Answer the following questions based on your own understanding.

1. Why is financial planning crucial for business planning?

2. What are the 5 key components of a financial plan and what are their purpose?

36
 EVALUATION

LESSON 4: Financial Planning

Name: Score:
Section: Date:

True or False. Write TRUE if the statement is correct and FALSE if otherwise.

________________ 1. It is optional to follow generally accepted accounting principles in

creating financial plan.

________________ 2. A financial business plan is created by gathering all the components of

the business and expressing them in numbers – both revenue and startup expenses.

________________ 3. The cost-volume-profit analysis shows the income or cash flows that
occur with different scenarios of key assumptions, like sales or costs.

________________ 4. If you use an accountant and your financial statements have been
audited, it is not necessary to state that in the plan.

________________ 5. Cash is king, but standard accounting income statements and balance
sheets show profitability and aspects of the financial health of the company.

________________ 6. Every projection is based on some assumptions.

________________ 7. Every business plan needs a cash flow projection.

________________ 8. Prospective data includes items like your balance sheet, cash flow
statement, tax returns, and capital, while historical data includes details like a projected
income statement that will help lenders and investors understand how you will invest
their money.

________________ 9. Many investors and lenders calculate ratios from the income statement
and balance sheet to determine whether to give money to the company.

________________ 10. Each section of a business plan has its own set of required pertinent
information, and the financial section is no different.

37
 REFERENCES

Business Queensland. (2021, June 3). Develop a marketing strategy. Retrieved from Business
Queensland: https://www.business.qld.gov.au/running-business/marketing-sales/
marketing-promotion/strategy
Clark, J. (2017, June 26). The Importance of an Organizational Chart. Retrieved from Datis:
https://www.datis.com/resource/the-importance-of-an-organizational-chart/
GutCheck. (2019, May 16). New Product Innovation: What it is, Why it matters, and How to get
it right. Retrieved from GutCheckIt: https://www.gutcheckit.com/blog/new-product-
innovation-what-it-is-why-it-matters-and-how-to-get-it-right/
Hurree. (n.d.). The Essential Guide to Marketing Strategy. Retrieved from Hurree: https://
info.hurree.co/en/marketing-strategy-essential-
guide#marketingstrategydefinitionimportance
ProductPlan. (n.d.). What is Product Development? Retrieved from ProductPlan: https://
www.productplan.com/learn/what-is-product-development/
Stowers, J. (2020, February 6). How to Write the Financial Section of a Business Plan.
Retrieved from Business News Daily: https://www.businessnewsdaily.com/10644-write-
financial-section-business-plan.html
Takeuchi, H., & Nonaka, I. (1986, January). The New New Product Development Game.
Retrieved from Harvard Business Review: https://hbr.org/1986/01/the-new-new-product
-development-game
Ward, S. (2020, December 12). How to Write the Financial Section of a Business Plan.
Retrieved from The Balance Small Business: https://www.thebalancesmb.com/writing-
the-business-plan-section-8-2947026
Williams, S. (n.d.). 7 types of organizational structures (+ org charts for implementation).
Retrieved from Lucidchart: https://www.lucidchart.com/blog/types-of-organizational-
structures
Wilson, M. (2013, March 8). 8 Tips On How to Create Successful and Innovative Products.
Retrieved from Under30CEO: https://www.under30ceo.com/8-tips-on-how-to-create-
successful-and-innovative-products/
 PHOTO REFERENCES

https://bsc.poole.ncsu.edu/wp-content/uploads/2021/03/chris-marquis-forces-article.jpg
https://alexandriasbdc.org/wp-content/uploads/2014/04/Business-Planning.jpg
https://cdn.shopify.com/s/files/1/0256/3473/4166/products/WalisTambo-
FilipinoStyleBroom_480x480.jpg?v=1625042270
https://www.gutcheckit.com/wp-content/uploads/2019/05/Q219-Blog-Image-
NewProductInnovation-051619-1.jpg
https://media.npr.org/assets/img/2013/06/10/light-bulb_wide-
7034a32ccf7643e39ea22009299a739f148e82c8.jpg?s=1400
https://media.istockphoto.com/vectors/think-outside-the-box-vector-id622286692?
k=20&m=622286692&s=612x612&w=0&h=nAfb5FVyEh6nC6PqGbyFlFQRQ6tgQDx_SR-
i9Ow4jjg=
https://cdn.corporatefinanceinstitute.com/assets/marketing-strategy.jpeg
https://web-static.wrike.com/cdn-cgi/image/width=900,format=auto/blog/content/
uploads/2020/08/Why-You-Need-a-Marketing-Plan-Template-1.jpg?
av=2b7ee5355a123bc1b8116940cbce1fa6
https://www.hillwebcreations.com/wp-content/uploads/2020/09/the-value-of-market-research-for-
seo.jpg
https://media.istockphoto.com/vectors/organizational-chart-corporate-business-hierarchy-vector-
id592684434?k=20&m=592684434&s=612x612&w=0&h=6aIMP-L9DSLCv3vPEDFhpiYVcG-
oxqCFekYKckUiE8A=
https://d2slcw3kip6qmk.cloudfront.net/marketing/blog/Updates/Nonprofit-Org-Chart-Example.png
https://d2slcw3kip6qmk.cloudfront.net/marketing/blog/Updates/IT-Org-Chart-Example.png
https://d2slcw3kip6qmk.cloudfront.net/marketing/blog/Updates/Flat-Org-Chart-Example.png
https://d2slcw3kip6qmk.cloudfront.net/marketing/blog/Updates/Matrix-Org-Chart.png
https://d2slcw3kip6qmk.cloudfront.net/marketing/blog/Updates/Org-Chart-by-Scrum-Team.png
https://d2slcw3kip6qmk.cloudfront.net/marketing/blog/Updates/Network-Org-Structure-
Example.png
https://alysonschafer.com/wp-content/uploads/2014/08/
learn_the_basics_about_giving_children_allowance-770x478.jpg
https://i0.wp.com/thedailycpa.com/wp-content/uploads/2020/08/shutterstock_661493680.jpg?
resize=1440%2C580&ssl=1
https://thecontentpanel.com/wp-content/uploads/2020/05/finance-plan-img-feat-1024x576.jpg