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Welcome
Business Start-Up Programme
Workshop 3
to the
‘Finance’
Workshop Links
Business Planning
Front Page
Executive Summary
The Business
Market
Operations
Finance
SWOT Analysis
Action Plan
The Essentials
Why start a business?
Viability assessment
Marketing Management control
Legal issues
Funding
Marketing
Product & service
Place
Price
Promotion Finance
Profit & Loss
Cash flow
Balance sheet
Finance Workshop - Introduction
FinanceStart-up
WorkshopsBusiness Plan Action Plan On-going
Support
Money In Business
Financial Control
Managing Financial
Information
Financial Reports
Finance Workshop Objectives:
Understand and use financial information to
manage and control your business.
Prepare financial forecasts to include in your business plan
Confirm the profit targets established in your viability assessment
Money In Business – The Working Capital Cycle
FinanceStart-up
WorkshopsBusiness Plan Action Plan On-going
Support
Money In Business
Financial Control
Managing Financial
Information
Financial Reports
The working capital cycle
Cash
Buy Materials
& Services
Sale
Invoice Customer
Investment Clearing debt Bank account
Buy more Material
Finance Control - Introduction
Finance Start-up Workshops
Business Plan
Action Plan On-going Support
Money In Business
Financial Control
Managing Financial
Information
Financial Reports
Management Accounts are financial reports about business activities
Finance Control – Management Accounts
Request for estimate/quotation
Prepare an estimate & submit a quotation
Deliver to customer
Plan & execute work
Receive an order
Prospect for work
Send invoice
Cash
Receive payment
Sales & Marketin
g
Operations
Finance
Finance Control – Management Accounts
Management Accounts Monitor:
Sales Performance
Cost control
Achievement of profit targets
Credit control/cash in the bank
The value of the business.
Finance Control – Management Accounts
£Cash
Cash flow
Balance Sheet
Profit & Loss
Finance Reports - Introduction
FinanceStart-up
WorkshopsBusiness Plan Action Plan On-going
Support
Money In Business
Financial Control
Managing Financial Information
Financial Reports
Profit & Loss
Cash Flow
Balance Sheet
Financial Reports – Profit & Loss - Introduction
Sales
Cost Of Sales (Direct Costs)
Gross Profit
Total Cost Of Sales
Pre-Tax Profit
Labour
Material
Total Overheads
£100,000
£25,000
£30,000
£55,000
£45,000
£25,000
£20,000 (20%)
Overheads (Fixed Costs) Salaries & wages
Premises
Marketing
Vehicle costs
Accountancy fees
Telephone
Post & stationery
Financials
Depreciation
Financial Reports – Profit & Loss - Introduction
Calculate No. of unit sales to meet target sales value:
Average order value £10
£100,000 ÷ £10 = 10,000 orders needed per year to achieve sales
Financial Reports – Profit & Loss - Introduction
Calculating Break Even:
Total Overhead (Fixed Costs) ÷ Gross Profit %
£25000 ÷ 45% = £55,556 ~ 5556 orders
Financial Reports – Profit & Loss - Introduction
Calculating No of hours needed to work to meet sales targets:
Wage rate @ £10/hour
Labour hours to achieve sales = £25000 ÷ £10
= 2500 hours
40 hours/week & 46 weeks/year = 1.3 people
Financial Reports – Profit & Loss - Introduction
Effect of Reducing Direct Cost:
1% reduction in direct cost gives an extra £1000 Gross Profit
Financial Reports – Profit & Loss - Summary
What it is Statement showing the trading situation of your business
The value of invoices processed during an accounting period for sales and purchases
Numbers on a piece of paper telling you whether you’ve done enough sales and controlled your costs sufficiently to make a profit
What it isn’t
A statement of cash in the bank!
How it’s used
To plan sales, costs and profit targets (Budgets)
To plan resources needed to achieve sales, costs and profit targets.
To measure effectiveness in achieving sales, controlling costs and generating profits.
To target performance improvement
Financial Reports – Cashflow - IntroductionSales
Cost Of Sales (Direct Costs)
Gross Profit
Total Cost Of Sales
Pre-Tax Profit
Labour
Material
Total Overheads
Overheads (Fixed Costs)
Salaries & wages
Premises
Marketing
Vehicle costs
Accountancy fees
Telephone
Post & stationery
Financials
Depreciation
Sales (Income)
Total Income
Net Income
VAT on Sales
Capital Investment
Total Expenditure
Labour
Material
Salaries & Wages
Marketing
Vehicle Costs
Accountancy Fees
Telephone
Post & Stationery
Financials (Capital Items)
Capital
Expenditure
VAT on Purchase
VAT
Differences
• P & L (Trading)
• Cash flow (Bank)
• Payments (debtors/Creditors)
• VAT
• Loan Repayments
• Depreciation
Financial Reports – Cashflow - Summary
What it is
What it isn’t
How it’s used
Statement of money moving in and out of your business bank account for invoiced sales and purchases.
Payment for work done and materials and services purchased
The lifeblood of the business
Necessarily your own money!!
To plan and control payments for invoice transactions
To identify requirements for funding business growth
To measure management effectiveness in credit control
Financial Reports – Balance Sheet - Introduction
Used longer than 12 months.
Transactions within 12 months(working capital)
Payment Longer than
12 months
Asset Value
Own Owe
Assets Liabilities
Fixed Assets Current Liabilities
Long Term Liabilities
Personal Loans
Bank Loans
Investors
Current Assets
Stock
Overdraft
Creditors
Tax/VAT
CashPlant & EquipmentVehicles
Property
Goodwill
Debtors
Financial Reports – Balance Sheet - Summary
What it is
What it isn’t
How it’s used
Statement of what you own and what you owe
Something to be scared about
As an indicator of business worth.
Brings together the elements of profit and loss & cash flow
Demonstrates the working capital cycle of the business
Provides key financial performance ratios
Where to show personal loans
Measures management effectiveness in building up the value of the business.
Understanding Finance Information
Finance Start-up Workshops
Business Plan
Action Plan On-going Support
Money In Business
Financial Control
Managing Financial
Information
Financial Reports Practical Exercises: Viability Assessment Profit & Loss Cash Flow Capacity Planning Estimating
Finance Management – Final Thoughts?
Request for quotation(RFQ)
Prepare an estimate & submit a quotation
Deliver to customer
Plan & execute work
Receive an order
Receive payment
Prospect for work
Who does it?
How do we do it?
Why do it?
To collect and understanding financial data.
Simple Arithmetic
Sets budgets and tracks your sales, costs and Profits.
What is financial management?
To give you control and help you achieve your profit targets and meet legal requirements
YOUSend invoice
What Next?
Familiarise yourselves with financial management tools.
Confirm the credibility of your business costs and your profit targets
The Entrepreneur Kick Start
Business Start-Up Programme
Thanks for listening
Keep in touch!
Keep in touch with each other, chat and network on Linked in.
www.linkedin.com
Join the ‘Business Start Up Group’ and then join ‘The
Workshop Group’ subgroup to keep in touch!