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1. Information
• Fire and Safety Procedures
• Toilets
• Refreshments
• Mobile Phone (Off Please)
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2. • 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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3. Overview
Your Business in Figures
The Figures Create These
Projections
Sales
Projections
Cash Flow
Fixed Forecast
Costs
Profit and Loss
Direct
Costs
Balance Sheet
Capital
Costs
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4. 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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5. Cash Flow Forecast
What 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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6. 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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7. 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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8. Income Sources – Funding.
• Own Money
• Family Investment
• Loans – banks etc
• Other Investors
• Credit Unions
• Credit Cards
• H P / Lease
• Grants
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9. INCOME SOURCES SALES
• SALES • SALES INCLUDES
Cash - Takings
Credit - Invoiced
- Subscriptions
- Ticket Sales
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10. 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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11. Matt & Slick
Live Example
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12. Profit and Loss Account
“Sanity not Vanity”
Other Differences
It’s Profit – not Cash • Drawings not in Profit.
• If all sales and purchases for • Capital Items not in Profit (
cash. Instead have
Depreciation).
• Not VAT registered.
• Doesn’t include loans or
• If no purchases for stock. loan repayments.
• If no Major Capital
Expenditure.
• Profit = Cash Flow.
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13. Working Capital
Credit terms
• How much credit will your customers demand?
• How much credit will your suppliers give?
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14. 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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15. Profit and Loss Account
Matt & Silk
Profit and Loss Account Month 1 Month 2 Month 3 Month4 Month5 Month6 Total
£ £ £ £ £ £ £
Income Sales 0
Sundry Sales 0
Total Income 0 0 0 0 0 0 0
Direct Costs
Materials 0
Wages 0
Total Direct Costs 0 0 0 0 0 0 0
Gross Profit 0 0 0 0 0 0 0
Rent & Rates 0
Elec/Gas 0
Rent & Rates 0
Telephones & Internet 0
Advertising / Promotion 0
Petrol 0
Printing & Postage & Stationery 0
Insurances 0
Professional Fees 0
Sundries 0
Sundries 0
Total Fixed Costs 0 0 0 0 0 0 0
Profit Before Tax 0 0 0 0 0 0 0
Taxation 0 0 0 0 0 0 0
Drawings 0
Retained Profit 0 0 0 0 0 0 0
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16. 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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17. 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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18. 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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19. Value Added Tax
Brief Outline
Not Registered
Registered Product not VAT rated
If Product is VAT rated. or
Sales Under £70,000.
And Sales Over £70,000.
or
Voluntarily Register.
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20. 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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21. The Funding Mix
“B E G“
Equity
Grant
Borrow
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22. Worked Examples
• Cash Flow
• Profit and Loss
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23. Break Even
Unit Price £ % %
Margin Mark-up
Sales 200 £30 6000
Direct Cost 200 £12 2400 150%
Gross Profit £18 3600 60%
Fixed Costs 2600
Drawings 1000
Net 0
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24. 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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25. What Next?
• Update your Business Plan.
• Does it still make sense?
• What’s missing?
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26. SWOT Analysis of
Business Idea
Strengths Weaknesses
Opportunities Threats
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27. ANY QUESTIONS ?
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