Financial Planning and Financing Part II: Investment Planning

What “Investment” Means in Practical Business Planning

In business administration, the term investment can be defined in many ways. For the purpose of financial and liquidity planning, however, a simple and pragmatic definition is sufficient.

While expenses typically cover items that occur regularly in your business (for example, monthly rent), investment planning focuses on assets that are used over a longer period of time and occur less frequently. Typical examples include computers, vehicles, office furniture, or business equipment.

Depreciation vs. Cash Flow: Why Timing Matters

Because long-lived assets lose value over time, their decline in value is recorded as depreciation (also referred to as “wear and tear for assets”) in the income statement. This depreciation is spread across the asset’s useful life.

From a liquidity perspective, however, the timing of cash flows is crucial. For example, when purchasing a company car, the full purchase price (including sales tax) is paid immediately. The sales tax is typically reimbursed by the tax authorities in the following month.

Thinking Long Term: Investments Are Not One-Off Events

Investments should always be planned over a longer horizon. Even though they occur irregularly, they are not limited to the startup phase. As your business grows, expansions, replacements, and upgrades will continue to require capital.

Create an investment plan for all assets that are intended to be used for more than one year and whose acquisition cost exceeds €800 net. These acquisition costs must be allocated across the asset’s normal useful life.

Useful Life, Asset Categories, and Thresholds

The length of the normal useful life is defined by tax authorities in official depreciation tables. By dividing the acquisition cost by the useful life (expressed in months), you obtain the monthly depreciation expense, which is then recorded in the income statement.

Investment planning must also be reflected in your liquidity planning. Different asset categories are treated differently:

• Durable assets (acquisition cost > €800 net): depreciated over their useful life
• Low-value assets (€250–€800 net): may be fully depreciated in the month of acquisition
• Consumables (< €250 net): expensed immediately

Key Questions for the Investment Planning Chapter

1. Which durable assets (purchase price > €800 net) do you plan to acquire, and when?
2. Create a list including acquisition date, net purchase price, normal useful life (in months), and resulting monthly depreciation.
3. Which low-value assets (€250–€800 net) do you plan to purchase, and when?
4. Create a list with acquisition dates and net purchase prices for these assets.
5. Transfer monthly depreciation amounts to the income statement.
6. Transfer total investment amounts to the cash flow statement.

Summary: Maximizing Liquidity Through Smart Asset Allocation

Investment planning forms a critical bridge between your short-term liquidity and the long-term health of your balance sheet. By clearly distinguishing between consumables, low-value assets, and durable investments, founders can forecast cash needs more accurately and manage tax-deductible depreciation effectively.

Planning these “rare” but high-impact expenditures ensures your startup remains solvent during growth phases and provides investors with a transparent and realistic view of how capital is deployed.