Corporate Planning and Financial Modeling

Functions of corporate planning

Corporate planning fulfills numerous internal and external functions. In the internal context, corporate planning serves management as a decision-making basis for deriving alternative courses of action, measures or an optimal allocation of existing resources. It is therefore an essential source of information for corporate management and performance control. In addition, decisions in the context of transactions or investments are often derived from underlying corporate planning, for example in the area of company valuations, restructurings, due diligences or fairness opinions.

In order to be able to make informed decisions in this context, consistent, plausible and thus valid corporate planning is essential.

Integrated corporate planning

The quality, validity and reliability of corporate planning and the financial information derived from it are in many cases ensured by a high degree of integration. Integrated corporate planning links the content and calculation of the balance sheet, income statement and cash flow statement, and thus the central accounting units of the annual financial statements, to form a consistent overall plan. All interdependencies and key performance-critical objectives, such as the long-term success of the company and financial stability, are considered in an aggregated manner.

Liquidity planning is a central component of integrated financial planning, which also includes income statement - and balance sheet-planning. The aim of liquidity planning is to determine the expected level of liquidity. Especially during crisis and in the context of restructuring processes, liquidity management and planning come into focus. The liquidity plan is a controlling tool for timely risk assessment. When it is created, all payment flows expected in the planning period are recorded so that solvency can be analyzed and risks counteracted. Liquidity planning goes beyond the mere cash flow statement. It is used to assess operational business transactions with regard to the amount and timing of payment effectiveness and takes into account other liquidity-relevant facts (trapped cash, assets that can be liquidated, etc.).

Our financial models offer the possibility to map planning periods quarterly, monthly and weekly. This enables the identification of short-term liquidity gaps at an early stage and the initiation of suitable countermeasures.

The results of liquidity planning often serve as the basis for deriving measures. Temporary shortfalls can be countered with targeted liquidity-creating measures as part of structured liquidity management. This can include the management of accounts receivable, accounts payable and inventories, as well as the implementation of external financing measures.

We create transparency by preparing or validating liquidity planning, develop proposals for liquidity-creating measures and support their implementation.

Financial Modeling

Financial modeling refers to the creation of complex, dynamic models to depict business issues, taking into account interdependencies. The most common application for financial modeling is the creation of integrated corporate planning and financial models. Other applications of financial modeling include simulation calculations, sensitivity analyses, analyses of insolvency and liquidation scenarios, and the analysis of large data sets (data analytics). In addition, we perform plausibility assessments in accordance with IDW Practice Note 2/2017 (internal and external plausibility), identify key value drivers of financial planning models and perform benchmarking analyses of the market and competition.

Financial models are mostly created using MS Excel, but increasingly also with the help of specialized planning tools. A powerful decision-making or integrated financial model is able to comprehensively evaluate transactions and other strategic objectives. At the same time, the structure of such a model is complex. This is not least due to the necessary reliability of the model and the requirement that it must be free of logical errors. To ensure the validity, consistency and plausibility of financial models, we offer a review of the computational accuracy and consistency. We also offer support in the selection and implementation of planning processes and planning applications. Our business and financial modeling specialists meet these requirements, ensuring that you can make informed decisions.

If you are interested and have any questions, please do not hesitate to contact us.