Planning calculations are the prerequisite for aid credits
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Planning calculations are the prerequisite for aid credits

In order to be able to obtain aid loans, small and medium-sized enterprises need planning calculations. Because planning calculations are the prerequisite for aid loans. For many SMEs, this is currently the biggest challenge, because without planning calculations, there is no liquidity. This article is aimed at medium-sized companies that have only had to prepare rudimentary planning calculations up to now. Of course, these are not new.

For many companies, financial planning was already a routine before the Corona pandemic, because they already reported continuously to lenders and/or their shareholders.

In order to obtain KfW aid loans, all enterprises must document their planning for an external third party. This is the best way to proceed.

Which planning calculations do banks require from you?

We know from our clients‘ experience that banks want to see liquidity planning and, in addition, medium-term earnings and profitability planning.

What is liquidity planning?

Liquidity planning is a look into the financial future of a company. It describes the development of liquid funds for a planning period. It also indicates when existing funds and the existing credit lines will be used up.

The planning period must show how aid credits received will be repaid. In specific terms, this means a time horizon that covers the entire duration of an aid credit.

What is revenue planning?

An earnings plan shows how earnings before interest, taxes, depreciation and amortisation (EBITDA) and the annual result will develop in the planning period. It shows whether a company is profitable and from when on a company is in the red.

The planning period for income planning should be the same as that for liquidity planning. Sensible revenue planning shows that your company will be profitable again by the end of the planning horizon at the latest.

What is profitability planning?

A profitability plan shows the return on capital employed. It is also referred to as return on investment (ROI) planning or return on capital employed (ROCE) planning.

To be more specific, this can mean that you have to draw up a budgeted balance sheet in addition to a revenue plan. This is part of a complete financial planning. However, if your bank does not request one, then you should refrain from doing so in the first step.

There are other ways in which you can show profitability. This also works in the form of the development of margins, the development of expense ratios and the return on sales. The planning horizon of your profitability planning should correspond to that of your income and liquidity planning.

You should pay attention to the following in planning calculations

Collect all necessary information from the accounts for the last full financial year. Analyze the data. Which expenses and income will be eliminated, which will be added, which will change in amount?

Next, define your expenditures as the outflow of liquidity, for example, for the repayment of liabilities.

This gives you an overview of the development of your liquid assets. On balance, this results in your liquidity requirements.

How do I ensure that my planning is correct?

You only know this when you compare actual and planned figures over time. The magic word in advance is plausibility. Your planning calculations should be sound, comprehensible and plausible. To prove this, experts use, e.g. previous year data or they compare the results of profitability planning over time. Banks also use industry figures as a benchmark.

It is important that you continually update your planning calculations, so that you can quickly implement changes and predict how they will affect the planning period.

A planning calculation is not a one-off event, but a process in the course of which you should take changing assumptions and actual developments into account.

Our consulting services

We can support you in all these tasks pragmatically and at short notice. We are experienced and implement useful tools to structure your planning process together with you.

Of course we are also at your side when it comes to the plausibility of the planning and the implementation of the ongoing planning process. Please contact us.

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