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Managing your business finance - NVI Wales Mentor session with Bevan & Buckland Chartered Accountants
Jan 23, 2015
Alison Vickers, Partner at Bevan & Buckland Chartered Accountants covered 'Managing your Finances'.
Including:
Understanding accounts – where has all the profit gone!
Setting financial goals
Cash flow and working capital
Profitability
Gearing and liquidity
Including:
Understanding accounts – where has all the profit gone!
Setting financial goals
Cash flow and working capital
Profitability
Gearing and liquidity
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Transcript
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Managing your Managing your Business FinanceBusiness Finance
Presented by:Alison Vickers
Partner
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AgendaAgenda
Understanding accounts
Setting financial goals
Cash flow and working capital
Profitability
Gearing & liquidity
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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
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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
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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
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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
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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
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Setting Financial GoalsSetting Financial Goals
Turnover is vanity
Profit is sanity
Cash is KING
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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
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Cash Flow & Working CapitalCash Flow & Working Capital
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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
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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
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Questions & Further AdviceQuestions & Further Advice
If you would like any additional information please contact me.
Alison VickersAudit PartnerDL: 01792 410116Mobile: 07814 [email protected]
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