managing your business finance - nvi wales mentor session with bevan & buckland chartered...

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

Managing your Managing your Business FinanceBusiness Finance

Presented by:Alison Vickers

Partner

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

AgendaAgenda

Understanding accounts

Setting financial goals

Cash flow and working capital

Profitability

Gearing & liquidity

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

Understanding the Accounts (Profit & Loss)Understanding the Accounts (Profit & Loss)

The financial statements consist of:

Profit & Loss Account

Sales (monies in)

Less cost of sales (expenditure)

Gross Profit

Less overheads (expenditure)

Net Profit

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

Understanding the Accounts (Balance Sheet)Understanding the Accounts (Balance Sheet)

Balance sheet

This summarises all assets & liabilities at a given date

Fixed assets – assets that have a life of more than one yearCurrent assets – used in one year

StockDebtors (owed to you)Cash

Current liabilities (monies you owe)OverdraftCreditors (suppliers)VATTaxes

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

Understanding the Accounts (Notes)Understanding the Accounts (Notes)

Notes to the account

The notes give more details on the figures in

the profit and loss account and balance sheet

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

Where has the Profit Gone? Where has the Profit Gone?

Scenario

Set up a company

Spend £500,000 on stock / asset

Acquire a load for £40,000 to be repaid over 6 years (£682 pm)

Hire purchase a vehicle (£475 pm)

Profits of the Company £75,000 before “drawings”

Director’s drawings £1,500 per month

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

Where has the Profit Gone? (cont.)Where has the Profit Gone? (cont.)

Profits / Cash

Profit £75,000

Less directors drawings (£18,000)

Less corporation tax (£ 8,000)

Less loan repayment (£ 8,184)

Less hire purchase (vehicle) (£ 5,700)

Less £10,000 paid on asset (£10,000)

Monies left £ 25,116

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

Setting Financial GoalsSetting Financial Goals

Turnover is vanity

Profit is sanity

Cash is KING

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

Setting Financial Goals (cont.)Setting Financial Goals (cont.)

Understand your costs

Look to improve margins – set as higher gross profit as possible

Produce short terms budgets / business plans

Produce medium term business plans – with targets that are achievable

Don’t “buy” work/sales

Set targets that are ACHIEVABLE

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

Cash Flow & Working CapitalCash Flow & Working Capital

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

ProfitabilityProfitability

Know your costs

There are hidden costsEmployers NICPensionsCorporation taxVAT

Any sales / contracts – price fully

Consider building in contingencies

Understand the market place

Be realistic in the director’s drawings – you cannot take profits that are not there

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

Gearing & LiquidityGearing & Liquidity

As the business grows, you will want to show a positive pictureCustomers confidenceSuppliers creditBank funding

The gearing on a business debt Debt / Equity

Liquidity Rates

The current ratio current assetscurrent liabilities

Acid test current asset - stockcurrent liabilities

………………………………………………………………………………………………………………………………………...

………………………………………………………………………………………………………………………………………... 01792 410100

mail@bevanbuckland.co.ukwww.bevanbuckland.co.uk

Questions & Further AdviceQuestions & Further Advice

If you would like any additional information please contact me.

Alison VickersAudit PartnerDL: 01792 410116Mobile: 07814 003067alison@bevanbuckland.co.uk