Because they have a great influence upon each other. Every amendment in business planning is reflected immediately and indirectly in financial planning. Think of changes to procurement costs for example. These not only influence the marginal income but also the bank balances and therefore the interest balance.
Vice versa, changes in the duration of outstanding debts for your receivables or accounts payable will clearly tip the balance in your profit and loss account. If you do not take this into account in your business plan, it will include errors right from the outset. Integrate the following common combination of prerequisites in your thought process:
Increasing sales – low margins – long duration of outstanding debts - high level of external financing – high interest.
I have experienced situations where hard earned increasing sales through these surrounding circumstances do not make an adequate contribution towards profit whatsoever. The additional marginal income was raised almost to the limit by increased interest paid. Add a few bad debts to this and you will recognize the critical situation that is gathering storm here.
Only through integrated planning can you recognize these effects in good time and take intervening action.
Do you want to get more information? We are happy to advise you.
back 
