A plan that supports decisions and holds up in talks with lenders.
Many companies plan. Few plan in such a way that earnings, balance sheet and liquidity are linked, and this is precisely where plans fail as soon as they are scrutinised. An earnings plan without a counterpart in the balance sheet says nothing about whether the company can actually finance the planned development.
We prepare integrated financial plans in which the profit and loss statement (P&L), balance sheet and cash flow are derived from the same assumptions, and we review existing plans when banks, shareholders or investors require an independent assessment.
What you gain
- 1A plan in which everything fits together. Earnings, balance sheet and liquidity are derived from one model, not maintained side by side.
- 2Reliability towards third parties. Banks and investors examine assumptions, not results. We disclose the assumptions and justify them.
- 3Scenarios instead of a single figure. You can see what happens if revenue falls ten per cent short of plan, before it happens.
- 4An independent sparring partner. We review your planning with an outside perspective that an internal team cannot have by its very nature.
- 5Fulfilling your monitoring duty. Since 2021, Section 1 of the StaRUG (the German Act on the Stabilisation and Restructuring Framework for Businesses) has required managing directors to monitor continuously any developments that threaten the company’s existence. Integrated planning over several years is the basis for this.
Three statements, one model
Integrated means that each assumption is set in exactly one place and from there affects all three statements. An additional order does not only increase revenue in the P&L. It increases material costs, ties up capital in inventories and receivables, delays the receipt of payment by the payment term and thus changes the use of the credit line, and, through interest, the result once again.
Tracking these feedback loops by hand is prone to error with every change to the plan. If the link is broken, the result is a plan that is convincing in terms of earnings but does not add up in terms of financing. Lenders usually spot this quickly.
We plan monthly and over several years: the current year on a monthly basis, the following years in less detail but using the same method. For the short term, the week-by-week liquidity planning is added alongside. It answers different questions and does not replace integrated financial planning.
When your planning needs to be reviewed
Often there is already a plan in place that raises doubts, in the context of a financing request, a renegotiation or restructuring talks. We review it in five steps:
- 1Arithmetical review. Are the statements consistent in themselves and with each other? Does the P&L lead to the balance sheet, and the balance sheet to the cash flow?
- 2Review of assumptions. Which assumptions underlie the figures, are they stated and are they justified?
- 3Comparison with market and history. Do the planned growth rates and margins fit the industry, the competition and the company’s own past?
- 4Assessment of measures. Are the planned improvements specifically backed up, with an owner, timing and amount, or merely entered as an effect on earnings?
- 5Report. A written result that states what holds, what needs to be reworked and where the risks lie.
In negotiations with lenders, the value of such a review lies less in the result than in who issued it. A plan that has undergone an independent plausibility review usually carries different weight from the same plan produced in-house.
When the planning is part of the restructuring concept
In restructuring situations, integrated planning is no longer a management tool, but evidence. It is the core of every restructuring concept in accordance with IDW S 6 (the German standard for restructuring concepts issued by the Institute of Public Auditors in Germany), it is the basis of every going concern forecast, and in practice it decides whether banks agree to a standstill.
What it then has to achieve goes beyond normal planning: the restructuring measures must be shown individually so that it remains clear how much of the planned result comes from ongoing business and how much from the restructuring. And it must withstand the benchmark comparison, the question of whether creditors are better off if the business continues than if it is broken up.
We know these requirements from practice in insolvency proceedings, not just from the literature.
