Welcome

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!