What Is Financial Planning and Who Needs It?

What is financial planning?

In practical terms, financial planning is a system of decisions that translates business goals into figures and deadlines. The goal of “taking on more sites” becomes a calculation: how many projects you can run at the same time, what payroll budget you need, how much working capital you should have, and which payment schedule matches actual material purchases and payments for work.

It helps to think of financial planning as three connected processes: planning, budgeting and forecasting. Planning sets the direction and constraints, budgeting allocates money across categories and periods, and forecasting updates the picture as deadlines, quantities, prices and agreements change.

In a project-based business, financial planning almost always starts with disciplined accounting for each site: “one site, one project”, with income, expenses and a balance recorded for that project. We explored this approach in the article “Project Financial Management: How to Manage a Budget and Control Money in the 101 App” (in Russian).

What is the purpose of financial planning?

The main purpose of financial planning is to make your business manageable through its finances. Once you understand where profit comes from and where cash is lost, you can make decisions with greater confidence: which projects to accept, what prices to maintain, which expenses are acceptable, and where you need a reserve.

In construction and renovation, the goal often sounds straightforward: complete the site without a cash shortfall and preserve the margin. In an agency, it is to keep client funds separate from company funds and track the profitability of each project. In manufacturing, it is to understand in advance how much money is tied up in purchases and inventory.

The impact becomes stronger when the financial goal connects to operations: work schedules, staged payments, employee expense advances, purchasing limits and expense documentation. The plan then becomes part of the process, rather than a separate file “for finance”.

Key tasks of financial planning

Define the tasks in terms of what the plan should provide to a manager every day, every week and every month. This makes it clear which reports and what level of detail you need.

• Show liquidity: whether you have enough money for mandatory payments and when a shortfall will arise.
• Set financial rules: who spends, who approves, and which documents substantiate expenses.
• Organise expenses by category so that overspending is visible against a specific category instead of disappearing into “the project”.
• Connect planned and actual figures: identify a variance early, while you can still address it through negotiation and changes to the order of work.
• Support decisions on prices and volumes: show what happens to the margin when material costs or timelines change.
• Keep funds separate: client money, company money, employee expense advances and reserves.

Expense categories also provide a useful framework for organising spending. In 101, this is described in “Allocating Expenses by Category” (in Russian): once the categories are set up, comparing planned and actual figures becomes clearer.

Stages of financial planning

Financial planning follows a recurring cycle: you create a plan at the start of a period, refine the forecast as work progresses, then compare the results and apply what you have learned to the next period.

The basic sequence below works for a small company as well as a project-based business managing several sites:

1. Define the planning horizon and unit: a year for the company, a quarter for a business line, or a month for projects.
2. Collect actual data: project revenue, direct costs, overheads, debts, advances and employee expense advances.
3. Build the structure: income and expense categories, cost-allocation rules and responsible people.
4. Prepare a plan for income and expenses and a cash-flow forecast: what you will earn and what will happen to cash.
5. Check whether it is realistic: payment dates, work stages, purchasing cycles, seasonality and taxes.
6. Approve limits and control rules: what requires advance approval, what must be substantiated afterwards, and which documents are mandatory.
7. Start comparing planned and actual figures and updating the forecast regularly: update upcoming payments weekly and review the overall picture monthly.

If you want to structure this cycle around analytics, see “Business Performance Analysis” (in Russian), which explains how to turn figures into management conclusions.

The structure of a financial plan: what should it include?

The structure depends on the size of your business, but a basic framework helps keep it manageable. In a project-based company, it is useful to build the plan at two levels: the company and individual projects.

You can compare your financial plan against three reports of actual results used in management accounting: the profit and loss statement, cash-flow statement and balance sheet. Keep planning documents separate from reports of actual results. For an explanation of these three reports, see “Cash Flow, Profit and Loss, and the Management Balance Sheet” (in Russian).

For budget types and where to begin if you do not yet have a budget, see “Types of Business Budgets: A Simple Explanation for Owners” (in Russian). You can start with a few key budgets and expand them as the business grows; there is no universal number for every company.

Review schedule: what should you check every week and every month?

Review checkpoints:

• Weekly: upcoming receipts and payments, employee expense advances, outstanding work acceptance documents and overdue receivables.
• Monthly: planned versus actual figures by category, project margins, overheads and adjustments to the cash-flow forecast.
• Quarterly: review prices, standard allowances, limits and investment decisions.

If employees make many small purchases for the business, you need a process for managing their expense advances. See “Accounting for Employee Expense Advances” (in Russian).

If a cash shortfall occurs unexpectedly, check the cash-flow forecast horizon, whether payment dates are confirmed, and changes in expenses: there may be more than one cause. “Cash Shortfalls in Construction” (in Russian) helps you examine the causes and common ways to cover the gap.

How can you integrate financial planning into teamwork and projects?

In a project-based business, connect the plan to the team’s actual actions: record purchases and expenses by category, keep supporting documents, and regularly reconcile project events against obligations and available funds. The project’s accounting balance alone does not show the balance in a bank account.

This approach fits the wider scope of project management: goals, the team, the plan, tools, the budget, communication and risks. For a general management framework, see “Managing a Project-Based Business” (in Russian).

When planning depends on work deadlines, synchronise finances with the schedule: stages, checkpoints and dependencies. See “Creating a Construction Work Schedule” (in Russian).

Compare estimated and reported project amounts separately from confirming that work has been completed and from the cash-flow schedule. Read about the indicators in the “Planned vs Actual” panel in 101 Help (in Russian). The basic principles of accounting for income and expenses are covered in “Financial Accounting for Income and Expenses” (in Russian); there is also a separate article, “How to Track Expenses Properly” (in Russian).

The easiest way to assess how financial planning fits your processes is a product presentation: ask to see projects, expense categories, supporting documents and the available analytics using examples from your own work.

Once you have regular analytics for projects and the company, the next step is to assess the business’s resilience more broadly: compare sites, examine the impact of pricing decisions, and review the Company Fund and key indicators. See “How to Set Up a Business Analytics System” (in Russian). Company Fund features and individual indicators depend on your subscription plan and user permissions; a complete set of company profit and loss, cash-flow and management balance sheet reports may require separate preparation and reconciliation.