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Information

• Fire and Safety Procedures• Toilets• Refreshments• Mobile Phone (Off Please)

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• How to complete a Cash Flow• How to complete a Profit and Loss• How to Forecast your Sales • Work Through live examples• Use of Ratio’s - Key Figures

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OverviewYour Business in Figures

The Figures Create These ProjectionsSales

ProjectionsFixed Costs

Direct Costs

Capital Costs

Cash Flow Forecast

Profit and Loss Balance Sheet

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Manage Your Business Finance

Financial Statement Role in Financial Planning

Cash Flow Forecast Projection of cash flowing into and out of the business, usually on a monthly basis

Profit & Loss Account

Summarises income and expenditure for a given period to show profit or loss

Balance Sheet Financial snapshot of the business showing assets and liabilities.

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Cash Flow ForecastWhat It Is and its Benefits

• It’s a prediction of money coming in and going out of your business

• Its your control over cash.• Shows what funding you need – and when.• Shows when your business starts generating

cash.• Any lender will ask for it.

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Step by Step Process

• How much is coming in?• How much is going out?• What’s the difference (+ or - )

• That’s your net cash flow (movement).

• Opening balance is what you started with.• Add the net movement for closing balance.

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How to do It

• You can do it with pen and paper.

• Most businesses use a computer spreadsheet (there‘s one on the disk given out on Day 1).

• Benefit of a spreadsheet is that you can try out different situations.

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Income Sources – Funding.

• Own Money • Family Investment• Loans – banks etc• Other Investors• Credit Unions• Credit Cards• H P / Lease• Grants

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INCOME SOURCES SALES

• SALES

Cash Credit

• SALES INCLUDES

- Takings - Invoiced - Subscriptions - Ticket Sales

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Expenditure

• EXPENDITURE for RUNNING the BUSINESS.

• Materials /Stock• Wages (For any employees)• Fixed Costs Rent/Rates Travel Costs Telephone inc Mobile and Broadband Insurance• Loans repayments & interest– Banks, etc• Hire Purchase Instalments

• OTHER EXPENDITURE• Drawings• Capital Expenditure items

• Working capital - stock – debtors – start up costs

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Matt & Slick Live Example

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Profit and Loss Account“Sanity not Vanity”

It’s Profit – not Cash • If all sales and purchases for

cash.• Not VAT registered.• If no purchases for stock.• If no Major Capital

Expenditure.• Profit = Cash Flow.

Other Differences• Drawings not in Profit.• Capital Items not in Profit

( Instead have Depreciation).• Doesn’t include loans or

loan repayments.

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Working Capital Credit terms

• How much credit will your customers demand?

• How much credit will your suppliers give?

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Profit and Taxation

• You will pay tax on your profit in your profit and loss account.

• Tax is calculated on your profit – before your drawings.

• What is left after tax and drawings is your ‘’retained profit‘’

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Profit and Loss Account

Matt & SilkProfit and Loss Account Month 1 Month 2 Month 3 Month4 Month5 Month6 Total

£ £ £ £ £ £ £Income Sales 0

Sundry Sales 0Total Income 0 0 0 0 0 0 0Direct Costs

Materials 0Wages 0

Total Direct Costs 0 0 0 0 0 0 0Gross Profit 0 0 0 0 0 0 0

Rent & Rates 0Elec/Gas 0Rent & Rates 0Telephones & Internet 0Advertising / Promotion 0Petrol 0Printing & Postage & Stationery 0Insurances 0Professional Fees 0Sundries 0Sundries 0

Total Fixed Costs 0 0 0 0 0 0 0

Profit Before Tax 0 0 0 0 0 0 0Taxation 0 0 0 0 0 0 0Drawings 0

Retained Profit 0 0 0 0 0 0 0

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Sales Forecasting

• Sales is most important Figure in Forecast.• Sales also most difficult to forecast.• Two elements , “Price“, “Units”,• Price X Units = Sales

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Forecasting Methods

• Market Based – size of market/share.

• Resource/Capacity – what’s possible.

• Value Based - level of sales needed to achieve profit goal.

• CROSS CHECK ALL THREE !

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Factors in Sales Forecast

• First Month will not be your highest sales.• Allow for a build up.• Recognise seasonal factors.• How will competitors react.• What are the market trends.• BE REALISTIC.

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Value Added TaxBrief Outline

Registered If Product is VAT rated.

And Sales Over £70,000.or

Voluntarily Register.

Not RegisteredProduct not VAT rated

or Sales Under £70,000.

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Preparing your Cash Flow

• Forecast your Sales.

• Think about when money will come in.

• Think about what you need to start.

• Think about what goes out.

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The Funding Mix “B E G“

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Worked Examples

• Cash Flow

• Profit and Loss

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Break Even

Unit Price £ % Margin

%Mark-up

Sales 200 £30 6000Direct Cost 200 £12 2400 150%Gross Profit £18 3600 60%Fixed Costs 2600Drawings 1000Net 0

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RATIOS

• Measures Performance

• Gross margin % - what you make on each sale

• Net profit % - what the business makes after fixed costs

• Different sectors have Different “%”ages

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What Next?

• Update your Business Plan.

• Does it still make sense?

• What’s missing?

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SWOT Analysis of Business Idea

Strengths Weaknesses

Opportunities Threats

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ANY QUESTIONS ?