How integrated corporate planning equips companies to make smart decisions
The term “integrated planning” refers to the close interlinking and coordination of several planning areas within a company. The plans of the various areas (e.g. finance, production, sales, R&D, marketing, personnel ) are integrated into an overall plan in order to ensure optimum performance. Only in this way can the various stakeholders, in particular shareholders and controlling bodies, assess a company/organization and compare it with the existing strategy. Integrated corporate planning is an iterative process, at the end of which those responsible receive information on which of their plans can be implemented and which resources are available for this purpose.
Networked thinkingWhy is it called “integrated”?
1. dovetailing of the areas: Integrated planning links central planning aspects such as financial planning, profit planning and liquidity planning. For example, financial planning (e.g. profit and loss) depends on the results of operational planning (e.g. production volumes and sales). This coordination ensures that all areas of the company are aligned with each other.
2. holistic approach: As the individual plans are not drawn up in isolation from each other, but in a systematic and coordinated process, planning integrates all key factors that influence the company’s development – such as strategic decisions, market analyses and operational measures. This allows the company to be managed holistically.
3. uniformity of the database: Integrated planning also means that all planning is based on the same data. Different departments use the same forecasts and assumptions, which ensures consistency and reduces communication problems between departments.
The integration of planning processes creates a comprehensive and coherent picture that can better reflect the complexity of a company and improve management tools.
Integrated corporate planning is a central component of modern corporate management. It combines strategic, financial and operational planning elements into a comprehensive management and control approach. This planning approach not only offers companies a structured procedure for achieving long-term goals, but also creates transparency and enables early countermeasures to be taken in the event of deviations. Corporate planning plays a key role in the German legal framework in particular, as board members have specific duties with regard to financial and liquidity planning.
A look behind the numbersObjectives of integrated corporate planning
The aim of integrated corporate planning is to link all of a company’s planning processes with one another. At its core, it comprises the following three planning areas:
Financial planning: This area includes the planning of the income statement, balance sheet and liquidity. This involves forecasting the company’s costs, income, investments and liabilities.
Revenue planning: Revenue planning focuses on the development of the operating business. Turnover, sales volumes and margins are planned here, which form the basis for financial planning.
Liquidity planning: This sub-area ensures that the company has sufficient funds to service liabilities at all times. This also includes the consideration of payment terms and loans.
Dovetailing these plans is key to avoiding contradictions and maintaining a consistent view of the company’s future development. Integrated planning allows key financial figures, investment decisions and operational processes to be coordinated.
Think strategically, act operationallythe contents of integrated corporate planning
Effective integrated corporate planning consists of several components, which are explained in more detail below:
a) Strategic planning
Strategic planning defines the long-term framework for the company’s development. It includes objectives, market analyses, competitive strategies and innovation planning. Strategic planning defines the direction in which the company intends to move and creates the basis for operational and financial planning.
b) Operational planning
Operational planning translates the company’s strategic goals into actionable measures and targets for day-to-day business. It contains detailed information on products, sales volumes, personnel requirements, production, marketing and sales. Key figures for managing the business can be derived from this, such as production capacities, sales costs or the efficiency of business processes.
c) Financial planning
Financial planning maps the financial future of the company. It provides information on the three main components:
Planned income statement: This shows the company’s expected sales and costs as well as the expected operating result.
Planned balance sheet: The planned balance sheet shows the planned assets, liabilities and equity of the company on the balance sheet date.
Planned liquidity statement: This depicts the cash flows and shows whether the company remains solvent at all times.
These three components form an integrated triad that works systematically and in accounting terms. It reflects the overall financial development of the company.
d) Scenario planning and sensitivity analysis
As the future cannot be predicted exactly, scenario planning plays a key role in integrated corporate planning. Various assumptions about market developments, cost trends or customer demand are run through in scenarios in order to assess their impact on the company’s financial situation.
The sensitivity analysis examines how sensitively the company reacts to certain changes. It shows, for example, how a change in sales volumes or the interest rate affects the company’s earnings.
Rethinking corporate planningThe most important functions for control and success
Integrated corporate planning not only serves to ensure corporate management capability, but also has a number of other key functions:
a) Transparency and control
The close link between operational, strategic and financial planning creates a comprehensive picture of the company’s future development. This transparency makes it easier to monitor the company’s targets and enables deviations from the plan to be identified at an early stage. This is particularly important in order to take measures in good time if certain key figures develop in an undesirable direction.
b) Risk management
By linking financial, earnings and liquidity planning, company management can identify potential risks at an early stage and initiate countermeasures. These include supply bottlenecks, declines in demand or liquidity shortages. Realistic scenario planning helps to test the company’s viability even under difficult market conditions.
c) Control instrument
Integrated planning serves as a central management tool for the company. Managing directors and managers receive a clear overview of the financial impact of their decisions. The result is a sound basis for investment decisions and strategic decisions.
d) Financing and communication
Solid corporate planning is an important basis for communication with external stakeholders, such as banks or investors. Lenders often require detailed plans in order to assess the company’s future solvency. Planning also plays a decisive role in the context of capital increases or when negotiating financing conditions.
Legal obligations of the executive bodies (Management Board, management) in Germany
In Germany, executive bodies are obliged to monitor the economic situation of their company and take measures in good time to prevent developments that could threaten its existence. Integrated corporate planning is an important tool for fulfilling these obligations.
a) Duty to conduct business properly
In accordance with Section 43 of the German Limited Liability Companies Act (GmbHG), managing directors are obliged to exercise the diligence of a prudent businessman. This also includes comprehensive and timely corporate planning in order to prevent undesirable developments. A breach of this duty of care can lead to liability claims against the managing director.
b) Obligation to file for insolvency
One of the most important duties of managing directors is to file for insolvency in good time if the company is insolvent or overindebted (Section 15a of the German Insolvency Code). Continuous liquidity planning helps the managing director to recognize impending insolvency at an early stage. Failure to file for insolvency in good time may result in criminal prosecution and personal liability.
c) Monitoring liquidity
The management is obliged to continuously monitor the company’s liquidity. Liquidity planning in integrated corporate planning is an indispensable tool for complying with this obligation. Accounting law (HGB) also requires careful planning, particularly with regard to provisions and the handling of liabilities.
d) Liability
Managing directors may be personally liable if they fail to fulfill their duty to manage the company properly. Incomplete, irregular, out-of-date or missing planning can be considered a breach of these duties. Managing directors must therefore ensure that corporate planning is complete and up-to-date in order to minimize potential liability risks.
The underestimated tool for entrepreneurial success
Integrated corporate planning is an indispensable tool for modern companies to make well-founded strategic decisions, ensure financial stability and identify risks at an early stage. It is not only a key management tool, but also fulfills important legal requirements, which are particularly important for managing directors and board members in Germany. Solid and regular planning is therefore both a success factor for companies and a safeguard against liability risks and undesirable financial developments.
Due to the continuously growing importance of integrated planning calculations, various software companies have focused on corresponding programs. These ensure audit compliance (going concern!), traceability and conformity with HGB and IFRS.
Companies that rely on integrated corporate planning can better adapt to market changes, take advantage of strategic opportunities and at the same time comply with legal obligations.
It is therefore all the more astonishing to come across companies that still do not use these tools for their performance.
30.9.2024
John of Spee
