The rise of AI tools has transformed how we approach many business tasks, and business planning is no exception. ChatGPT, Claude, and other AI assistants can help with research, content generation, and initial brainstorming. But before you rely entirely on AI to create your business plan, it’s essential to understand where these tools excel and where they fall dangerously short.
Where AI Can Help With Business Plans
AI tools can be genuinely useful for several aspects of business planning:
Content-Heavy Sections
AI excels at generating written content based on prompts. For sections like your executive summary, company description, or product overview, AI can help you:
- Structure your thoughts into coherent narratives
- Expand brief notes into fuller paragraphs
- Refine and polish your language
- Generate alternative ways to phrase key concepts
Basic Market Research
AI can provide a starting point for understanding your market by:
- Summarising industry trends and statistics
- Identifying potential competitors
- Outlining general market characteristics
- Suggesting relevant keywords and search terms for deeper research
Competitor Analysis
When you provide information about your competitors, AI can help by:
- Organising competitor information into comparison tables
- Identifying potential gaps in the market
- Summarising competitor strengths and weaknesses
- Suggesting areas where your business might differentiate itself
Brainstorming and Idea Generation
AI can be an excellent brainstorming partner for:
- Marketing strategy ideas
- Potential product or service variations
- Risk identification
- SWOT analysis elements
Where AI Falls Short: The Financial Foundation
Here’s the critical issue: A business plan without robust financials is like a car without an engine. It might look impressive on the surface, but it won’t take you anywhere meaningful.
AI has significant limitations when it comes to the financial projections that form the backbone of any purposeful business plan:
Complex Financial Calculations
Financial modelling requires sophisticated calculations that AI simply cannot handle reliably. Consider a typical startup scenario:
A retail business projects £500,000 revenue in year one, growing 20% annually. They need to account for:
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Multi-year projections with interconnected variables - Revenue growth affects inventory requirements, which impacts cash flow, which influences financing needs. AI cannot reliably model these dependencies.
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Cash flow forecasting that accounts for timing of payments and receipts - If customers pay on 30-day terms but suppliers require payment within 14 days, your cash requirements change dramatically. AI tools often ignore these crucial timing differences.
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Break-even analysis with variable cost structures - As volume increases, per-unit costs typically decrease. AI struggles to model economies of scale accurately.
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Scenario modelling showing conservative, base case, and optimistic projections - Professional business plans need multiple scenarios. AI-generated figures often lack the internal consistency required across different scenarios.
Country-Specific Tax and Legislation
Every country has unique tax rules and business regulations that affect financial projections. In the UK alone, there are numerous tax considerations that AI simply cannot handle accurately:
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VAT calculations - The UK VAT registration threshold is currently £90,000, but AI tools often cite outdated figures or use thresholds from other countries. Getting this wrong can result in inaccurate revenue projections.
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Corporation Tax - The current UK Corporation Tax rate is 25% for profits over £250,000, with a small profits rate of 19% for profits up to £50,000. AI tools struggle with marginal relief calculations and may use incorrect or outdated rates.
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National Insurance contributions - Employer NI contributions are 13.8% on earnings above £9,100 per year (2025-26), but AI cannot reliably calculate the complex interaction between NI, PAYE, and various thresholds.
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Annual Investment Allowance - The Annual Investment Allowance has changed repeatedly in recent years, from £200,000 to £1 million and back. AI training data often reflects outdated figures, leading to incorrect capital allowance calculations.
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Making Tax Digital - HMRC’s Making Tax Digital requirements have specific compliance standards that affect how financial records must be kept and reported.
AI tools are trained on general information and cannot reliably apply the specific, up-to-date tax rules for your jurisdiction. Getting these wrong doesn’t just make your plan look unprofessional - it can lead to seriously flawed financial assumptions that undermine your entire business case.
Depreciation and Asset Management
Proper financial planning requires understanding complex depreciation rules that AI cannot reliably navigate. For example:
A startup purchases equipment for £50,000. They need to consider:
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Different depreciation methods - Straight-line vs. reducing balance depreciation creates different profit profiles over time. AI often applies arbitrary depreciation rates without considering industry standards or asset lifespan.
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Capital allowances vs. depreciation - In the UK, capital allowances for tax purposes are different from accounting depreciation. A £50,000 equipment purchase might qualify for 100% First Year Allowance for tax, while being depreciated over 5 years in the accounts.
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Timing of capital expenditure - When you purchase assets affects both cash flow and tax relief. AI cannot model the optimal timing of capital purchases based on available tax allowances and cash availability.
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Impact on cash flow vs. profit - Depreciation affects profit but not cash flow, while the capital purchase affects cash but not profit. This fundamental accounting distinction frequently trips up AI-generated financial models.
These are nuanced calculations that require specialist knowledge and understanding of UK accounting standards, not generic AI responses.
Accurate Financial Projections
Perhaps most importantly, financial projections need to be credible and defensible. Whether you’re applying for a Start Up Loan (which requires detailed 12-month cash flow projections) or seeking bank funding, investors and lenders will scrutinise your numbers. They need to:
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Be based on realistic assumptions - If you’re projecting 50% month-on-month growth, you need to justify how you’ll achieve it. AI often generates impressive-looking growth curves without the underlying rationale.
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Show clear linkages between different financial statements - Your profit and loss, balance sheet, and cash flow must interconnect correctly. A £100,000 profit with negative cash flow needs explanation through working capital movements and capital expenditure.
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Account for seasonality and business cycles - A gift shop that shows flat monthly sales when 60% of revenue typically comes in Q4 will immediately raise red flags.
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Demonstrate understanding of working capital requirements - Rapid growth often requires increased working capital. AI-generated plans frequently miss this crucial element, showing profitable businesses running out of cash.
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Include sensitivity analysis - What happens if sales are 20% lower than projected? If costs increase by 10%? Professional plans need this analysis.
AI cannot provide this level of financial rigour. It can generate numbers, but it cannot ensure those numbers make business sense or hold up under scrutiny from experienced lenders and investors.
AI as a Tool, Not a Replacement
The key message here is simple: use AI as a tool to aid your business planning, not as a replacement for specialist software or professional consultants.
AI can save you time on research and content generation. It can help you articulate your ideas more clearly. But when it comes to the financial foundation of your business plan, you need purpose-built tools that are designed specifically for this complex task.
The SquarePlan Approach: AI Where It Helps, Precision Where It Matters
At SquarePlan, we’ve built business plan software that combines the best of both worlds:
Specialist Financial Modelling
Our software uses complex financial calculations and projections that AI simply cannot match. We’ve built these specifically for startup businesses, incorporating:
- UK-specific tax calculations including VAT, Corporation Tax, and National Insurance
- Proper depreciation and capital allowance treatment
- Cash flow forecasting with payment term modelling
- Scenario analysis showing how your business performs under different conditions
- Integrated profit and loss, balance sheet, and cash flow statements
These aren’t generic AI-generated numbers - they’re the result of years of experience helping UK startups create credible, investor-ready financial projections.
AI Built-In Where It’s Useful
We’ve also integrated AI capabilities where they genuinely add value:
- Competitor research assistance to help you gather and organise market intelligence
- Intelligent summaries based on the key information you enter
- Content suggestions for narrative sections of your business plan
The Crucial Difference: Your Input Matters
Here’s something vital to understand about AI, whether it’s in our software or standalone tools: AI is only as good as the information you provide. If you enter inaccurate or incomplete information, AI-generated content will reflect those flaws.
This is why we’ve designed SquarePlan to guide you through a structured process, asking the right questions to ensure you’re providing complete, accurate information. Our AI features then work with this solid foundation to enhance your plan, not build it on shaky ground.
Making the Right Choice for Your Business Plan
If you’re considering using AI for your business plan, here’s our advice:
Do use AI for:
- Initial research and information gathering
- Drafting and refining narrative content
- Brainstorming ideas and approaches
- Summarising information you’ve collected
Don’t rely on AI for:
- Financial projections and forecasts
- Tax calculations and compliance
- Complex scenario modelling
- Final financial statements
Consider specialist business plan software like SquarePlan when:
- You need credible financial projections for funding applications
- You want UK-specific tax and legislative compliance
- You need to model different business scenarios
- You’re applying for Start Up Loans or similar funding
- You want a professional, investor-ready business plan
The Bottom Line
AI is a powerful tool that has a place in business planning. Used correctly, it can save time and improve the quality of your narrative content. But it cannot - and should not - replace the specialist financial modelling that forms the foundation of any serious business plan.
By understanding where AI helps and where it falls short, you can use these tools effectively while ensuring your business plan has the financial rigour it needs to succeed.
Try our business plan software - Get complex financial modelling with AI assistance where it matters. Built specifically for UK startups. £39.99/month, cancel anytime.
Need help deciding on the right approach for your business plan? Get in touch - we’re always happy to point you in the right direction.