A funds flow diagram is a map of who pays whom in a business, for what and how often. For a payments company with many parties in the middle, it comes before the financial model, because it shows where every slice of each payment goes.
The company builds mobile payments for people who don't have a bank account. Shops take payments on a phone, people send money to each other, and the company takes a small cut. It works in Sub-Saharan Africa, it was growing every month, and investors were interested.
The problem was the paperwork. The financial model was one tab with the numbers typed in by hand. Change one thing and nothing else moved. The pitch deck was 40 slides, most of them screenshots of the app. Investors liked the business, but they couldn't get comfortable with the numbers.
We started with a funds flow diagram
A payments business has a lot of people in the middle. There are shoppers and shop owners. There are agents who turn cash into digital money. There are banks and mobile networks, and each one takes a slice. If you start building formulas before you know where every slice goes, you build the wrong model.
So before we built anything, we mapped the whole system: who pays whom, for what, and how often. The map showed three separate ways the company makes money. It takes a commission on each payment. Shops pay a monthly fee. And there are extra services sold on top. Each one grows for a different reason, so each one needed its own part of the model.
Then we built the model on the map
The new model runs five years. Each revenue stream has its own drivers, so an investor can see what happens if shops grow faster than payments, or the other way round. We added what it costs to win and serve each customer and what each one brings in over time. That's what investors call unit economics. We also built three cases, a base, a low and a high, so nobody has to guess how bad a bad year looks.
Nothing is typed in by hand any more. Change an assumption and the whole model moves with it.
A shorter deck with a story
We cut the deck from 40 slides to 13, with an appendix for the detail. Most of the screenshots went. In their place is a story an investor can follow in a few minutes: the size of the gap, how the company fills it, and why now. The product still shows up, but only where it proves a point.
Answers ready before anyone asked
We also built the two things investors ask for next. A valuation using four methods backed up the price the founders were asking. A data room with 45 documents, sorted by category, meant every follow-up question already had an answer waiting.
What we built
- A map of every party in the payment chain and what each one pays
- A five-year model with three revenue streams, unit economics and three cases
- A 13-slide deck with an appendix
- A four-method valuation and a 45-document data room
If your business has a lot of people in the middle, draw who pays whom first. Then build the model on the drawing.
Questions founders ask
What is a funds flow diagram?
A funds flow diagram shows every party in a transaction and how money moves between them. For a mobile payments business, that means shoppers, shop owners, agents who turn cash into digital money, banks and mobile networks, along with the slice each one takes. It answers who pays whom, for what and how often. You draw it before you write formulas, so the model follows the real money.
How do payment companies make money?
Most take a small fee on each payment, as a percentage, a fixed amount or both. Many also charge merchants a monthly fee and sell extra services on top. The company in this case had all three: a commission on each payment, a monthly fee from shops and added services. Each one grows for a different reason, so each one needs its own drivers in the model.
How do you build a financial model for a payments company?
Start from the funds flow diagram. Give each revenue stream its own drivers, so an investor can see what happens if shops grow faster than payments, or the other way round. Add what it costs to win and serve each customer and what each one brings in over time. Build a base, a low and a high case, and link everything to one set of assumptions so nothing is typed in by hand.