financial planning presentation

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FINANCIAL PLANNING- HOW TO PRODUCE FINANCIAL FORECASTS PART OF FINANCE FOR NON FINANCIAL MANAGERS COURSE PROGRAMME

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KEY OBJECTIVES

What is financial planning

Benefits of financial planning

How to put together a financial plan

Practice illustration of financial plan


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DEFINITION OF FINANCIAL PLANNING

Concern with the determination of financial resources required to deliver business goals and objectives


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WARNING- FINANCIAL PLANNING TIPS

Financial planning must be preceded by a business plan

Effective financial plans starts from clearly understanding the vision and mission of a business


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Help businesses analyse resources Help businesses determine viabilityAction plan for financial weaknessesFinancial resources for meeting goalsHow much resources required for investment

OBJECTIVES OF FINANCIAL PLANNING


FINANCIAL PLANNING V EXTERNAL ENVIRONMENT

Questions To Be Asked In Regard PEST Analysis:

Political

Economical

Social attitudes

& Changes

Technology


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A SIMPLE APPROACH FOR PREPARING FINANCIAL PLAN

What resources are required The competition profile Key suppliers of resources The market profile The political regulations and economic conditions


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SETTING REALISTIC ASSUMPTIONS FOR FINANCIAL PLANNING

Sales Turnover Forecast Expenditure Forecast Cash Flow Forecast Income and Expenditure Accounts (P&L) Forecasts Balance Sheet Forecast


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PRACTICAL EXAMPLE FOR PUTTING TOGETHER SALES FORECAST

English Courses:

No of students (demand for English courses)

500 Students

No of course hours ( i.e. The number of hours students will spend studying the courses)

400 hours

Course fee per student £100

Total sales income forecast £ 50,000


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PRACTICAL EXAMPLE FOR PUTTING TOGETHER SALES FORECAST

ICT Courses:

No of students (i.e demand for ICT courses)

200 Students

No of course hours ( i.e. The number of hours students will spend studying the courses)

80 hours

Course fee per student £50

Total sales income forecast £ 10,000


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PROFILING SALES INCOME FORECAST

Jan Feb Mar

Apr May

Jun Jul Aug Sep Oct Nov Dec

£ £ £ £ £ £ £ £ £ £ £ £5000

6000

9000

20000

Sales Income

Financial Year2007/08

January £5000February £5000March £5000April £5000May £5000June £5000July £5000August £5000September £5000October £5000November £5000December £5000Total £60,000


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Staff Name Post Title Gross

SalariesEmployer’s

NICEmployers Pensions

Total Salary

Peter Jones Manager £14,000 £500 £500 £15,000

Denis Bill Tutor £9,200 £200 £200 £9,600

Total £23,200 £700 £700 £24,600

PRODUCING ANNUAL SALARIES FORECAST


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ANNUAL EXPENDITURE FORECAST

Expenditure Assumptions £Salaries: Admin 1 (part time)

Manager15,000

Tutor 2 (part time) £10 per hour x 480 hours

9,600

Marketing & Sales 10,000Rents £300 per month 3,600Office & Training Equipments 10,000

Utilities (telephone etc) 1,200Stationery £60 per month 720

Insurance 400Professional fees (legal, accountancy etc)

10,000

Other expenses 10,000Total 70,520

Summarise your assumptions here:1. Staffing : 1 Office Manager & 2 tutors (all part-time)2. Prices of goods and services are based on current market conditions.3. All cost types have been carefully researched.4. Professional fees include all types of professional advice required from

the stage of setting up the business etc.


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PROFILING EXPENDITURE FORECAST

Expenditure Financial Year2007/08

January £15043.33

February £5043.33March £5043.33June £5043.33July £5043.33August £5043.33September £5043.33October £5043.33November £5043.33December £5043.33

£70,520


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PUTTING TOGETHER PROFIT & LOSS ACCOUNT FORECAST

£ £ Commentary For Users

Sales £60,000 See total income forecast

Cost of Sales (tutors salaries) 9,600 This is a direct cost of training

services

Gross Profit 50,400

Administration & OverheadsAdmin Manager 15,000

Marketing & Sales 10,000

Rents 3600

Office & Training Equipments (depreciation) 2500 See note below

Utilities (telephone etc) 1200

Insurance 400

Stationery 720

Professional fees (legal, accountancy etc) 10,000

Other expenses 10,000 53,420

Net Profit 3,020


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PUTTING TOGETHER OF CASHFLOW FORECAST

WHAT IS CASH-FLOW FORECASTING

A projection of actual cash receipts against cash payments

A measurement of liquidity


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PUTTING TOGETHER THE CASH FLOW FORECAST

Key questions:•When do you expect to receive the sales income in your sales forecast? • When do you expect to pay suppliers for goods and services you will purchase?

•What will be your credit policy? In short, will customers be given credit and if so how many days?

•Are the credit terms extended to customers too generous or competitive?

•Is there a plan to raise capital for the business from third parties?

•Who are the main financiers of the business?


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CASH FLOW FORECASTS IN PRACTICE

Description Jan- March 07 April-June 07 July-Sept 07 Oct-Dec 07 Total

£ £ £ £ £

Balance brought fwd -12630 -10260 -12890

Cash Receipts

Sales income- training 10000 15000 15000 15000 55000

Total Receipts 10000 15000 15000 15000 55000

Cash Payments

Salaries

Admin Manager 3750 3750 3750 3750 15000

Tutor 2400 2400 2400 2400 9600

Marketing 2500 2500 2500 2500 10000

Rents 900 900 900 900 3600

Equipment 10000 10000

Utilities 300 300 300 300 1200

Stationery 180 180 180 180 720

Insurance 100 100 100 100 400

Professional fees 2500 2500 2500 2500 10000

Other Expenses 5000 5000 10000

Total payments 22,630 12630 17630 17630 70520

Cash Book Balance -12630 -10260 -12890 -15520


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BALANCE SHEET FORECASTS 2007/08

Fixed Assets £ £Office & Training Equipment

10,000Depreciation ( 2500)Net Book Value 7500

Current AssetsDebtors 5000Cash (16000-15520) 480

5480Current Liabilities 12980 Creditors 0

Long-Term Liabilities 16000

Loss in the year (3020)12980


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BALANCE SHEET FORECASTS CONTD

Office Equipment – Is an asset and the full costs should be recorded in the balance sheet. It is a tangible item used to create income.Depreciation- this represents the reduction in the value of the equipments to recognise their contribution toward income generation. Some assets appreciate in value in real life and so there may be justification not to make any adjustments for depreciation.Current Assets- This is a mixture of different types of sub-assets. Debtors are monies owed to the business- refer to the cash flow forecast. Cash balance is the difference between the loan of £16000 and the shortfall shown in the cash flow forecasts before the loan.Long-term liabilities- represent the amount of loans borrowed from the bank.Loss in the year- is the difference between the sales forecast and expenditure forecast shown in the profit and loss forecast statement.


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CONCLUSION – THE END

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financial planning presentation

Education

ssumptions f

pproach f

f inance

financial forecasts

ncome f orecast

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