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Start business unit 6
1. Information
ā¢ Fire and Safety Procedures
ā¢ Toilets
ā¢ Refreshments
ā¢ Mobile Phone (Off Please)
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2. ā¢ How to complete a Cash Flow
ā¢ How to complete a Profit and Loss
ā¢ How to Forecast your Sales
ā¢ Work Through live examples
ā¢ Use of Ratioās - 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
ā¢ Itās a prediction of money coming in and going
out of your business
ā¢ Its your control over cash.
ā¢ Shows what funding you need ā and when.
ā¢ Shows when your business starts generating
cash.
ā¢ Any lender will ask for it.
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6. Step by Step Process
ā¢ How much is coming in?
ā¢ How much is going out?
ā¢ Whatās the difference (+ or - )
ā¢ Thatās your net cash flow (movement).
ā¢ Opening balance is what you started with.
ā¢ Add the net movement for closing balance.
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7. How to do It
ā¢ You can do it with pen and paper.
ā¢ Most businesses use a computer spreadsheet
(thereās one on the disk given out on Day 1).
ā¢ Benefit of a spreadsheet is that you can try out
different situations.
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8. Income Sources ā Funding.
ā¢ Own Money
ā¢ Family Investment
ā¢ Loans ā banks etc
ā¢ Other Investors
ā¢ Credit Unions
ā¢ Credit Cards
ā¢ H P / Lease
ā¢ Grants
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12. Profit and Loss Account
āSanity not Vanityā
Other Differences
Itās Profit ā not Cash ā¢ Drawings not in Profit.
ā¢ If all sales and purchases for ā¢ Capital Items not in Profit (
cash. Instead have
Depreciation).
ā¢ Not VAT registered.
ā¢ Doesnāt include loans or
ā¢ If no purchases for stock. loan repayments.
ā¢ If no Major Capital
Expenditure.
ā¢ Profit = Cash Flow.
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13. Working Capital
Credit terms
ā¢ How much credit will your customers demand?
ā¢ How much credit will your suppliers give?
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14. Profit and Taxation
ā¢ You will pay tax on your profit in your profit and
loss account.
ā¢ Tax is calculated on your profit ā before your
drawings.
ā¢ What is left after tax and drawings is your
āāretained profitāā
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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
Ā£ Ā£ Ā£ Ā£ Ā£ Ā£ Ā£
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
ā¢ Sales is most important Figure in Forecast.
ā¢ Sales also most difficult to forecast.
ā¢ Two elements , āPriceā, āUnitsā,
ā¢ Price X Units = Sales
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17. Forecasting Methods
ā¢ Market Based ā size of market/share.
ā¢ Resource/Capacity ā whatās possible.
ā¢ Value Based - level of sales needed to achieve profit
goal.
ā¢ CROSS CHECK ALL THREE !
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18. Factors in Sales Forecast
ā¢ First Month will not be your highest sales.
ā¢ Allow for a build up.
ā¢ Recognise seasonal factors.
ā¢ How will competitors react.
ā¢ What are the market trends.
ā¢ 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 Ā£70,000.
And Sales Over Ā£70,000.
or
Voluntarily Register.
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20. Preparing your Cash Flow
ā¢ Forecast your Sales.
ā¢ Think about when money will come in.
ā¢ Think about what you need to start.
ā¢ Think about what goes out.
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23. Break Even
Unit Price Ā£ % %
Margin Mark-up
Sales 200 Ā£30 6000
Direct Cost 200 Ā£12 2400 150%
Gross Profit Ā£18 3600 60%
Fixed Costs 2600
Drawings 1000
Net 0
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24. RATIOS
ā¢ Measures Performance
ā¢ Gross margin % - what you make on each sale
ā¢ Net profit % - what the business makes after fixed costs
ā¢ Different sectors have Different ā%āages
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25. What Next?
ā¢ Update your Business Plan.
ā¢ Does it still make sense?
ā¢ Whatās missing?
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