What is a business plan?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
A business plan is a written document that sets out what a business aims to achieve, how it plans to get there and the risks it faces along the way. Its financial section shows the money the business has, the money it needs and the income it expects, which is why lenders and investors often ask to see one.
The financial section is where a business plan meets the books. For a business that is already trading, the figures for what it owns, owes and has earned come from its balance sheet and profit and loss statement. Its budget sets out the income and spending it plans for the year, and its cash flow forecast shows when money is expected to come in and go out. A new business starts from estimates instead, and those estimates are worth checking against the books once trading begins.
A plan written from books that are months behind starts from the wrong figures. Bringing the records up to date and reconciling the bank accounts before writing the financial section means the plan begins from the business's real position.
A plan is not entered in the books, but the books test it. Setting actual sales, costs and cash beside the plan's figures shows whether its assumptions are holding, and which parts of the plan need to change.
In Australia
business.gov.au says a business plan sets the direction of a business and its objectives, maps out how its goals will be met, and helps it recognise risks and manage them. It suggests reviewing and updating the plan regularly as the business changes, and keeping earlier versions in your records.
Its guide to applying for a business loan says lenders will usually ask to see a business plan before agreeing to a loan, and that an existing plan should be brought into line with the business's current goals and financial details. Its business plan page adds that lenders and investors will want to know how much money you have, how much you need and what you expect to earn soon.
Its guidance on managing cash flow says the business plan is where the approach to managing cash flow is set, and its page on leasing or buying equipment suggests including a list of the equipment you need in the plan.
Worked example
| Part of the financial section | Where the figures come from |
|---|---|
| Money the business has now | Balance sheet and reconciled bank balances |
| Income and costs to date | Profit and loss statement |
| Income and spending planned for the year | Budget |
| When cash is expected in and out | Cash flow forecast |
| Money the business needs | Any shortfall shown by the budget and the cash flow forecast |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Writing the financial section from memory or old figures instead of from up-to-date books.
- Leaving loan repayments and equipment purchases out of the cash flow figures in the plan.
- Writing the plan once and never setting actual results beside it.
Related terms
Related service
Management and cash-flow reports
Monthly reports that show where the business stands.
Sources
- Develop your business plan
business.gov.au, Australian Government. Current at 16 October 2026, released 7 November 2024. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Apply for a business loan
business.gov.au, Australian Government. Current at 16 October 2026, released 18 February 2026. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Guide to managing cash flow
business.gov.au, Australian Government. Current at 15 October 2026, released 22 December 2025. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Leasing or buying vehicles and equipment
business.gov.au, Australian Government. Current at 16 October 2026, released 23 October 2024. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.