Day 7 cash flow

136 views

Published on

Published in: Economy & Finance, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
136
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Day 7 cash flow

  1. 1. B R I A N W S T E E L developing higher performance Starting in Business Finance – Cash flow
  2. 2. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College After the Cash Flow the Profit Forecast is the document lenders will be most interested in.
  3. 3. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College Jan Feb Mar Apr May Jun Total Receipts Cash Sales Credit Sales Capitol Introduced Other Income Total Receipts Expenditure Payments to creditors Salaries/Wages Rent/Rates Water Insurance Repairs/Renewals Heat/Light/Power Maintenance Printing/Stationery Transport Telephone Professional Fees Capital payments Loan repayments Bank charges Drawings Total Expenditure Net cash flow Opening balance Closing balance
  4. 4. The Start-up Programme – City of Bristol College B R I A N W S T E E L developing higher performance Charlie’s is a small retail operation which has just opened. Her bank have asked for a cash flow and profit forecast for the next 6 months before they will open a bank account. Charlie finds or estimates the following information: Including the £3,000 she has to start the business she believes she will turnover £24,650 made up of £200 in the first month, then £500, 950, 500, 200 and 300. Trade sales on credit terms will bring in £1000, 5000, 6000, 4000, and 3000 but will not start until the second month. Payments to her creditors will start in month 3 with an initial payment of £3000, followed by payments of 2500, and 2 lots of 2000. Wages for the six months will be £5502 paid equally each month. Rent is £250 per month and power is £500 per year payable in two payments starting in month4 there is also an annual maintenance charge of £200 payable in month 2. Other costs Charlie knows about include a payment for cards and stationery of £200 payable immediately. A repair bill on her van which is due in month 2 amounts to £200. Insurance premiums totalling £280 due in month1 a telephone bill she estimates will be £150 due in month4 and her solicitors bill of £200 which he has put back until month 6. Water rates of £60 are due in month 3. She also has to pay for equipment purchased at a cost of £4000 in month 1. Charlie also has a bank loan, previously agreed which she is attaching to the business and will be making £310 per month repayments from month 2 but she is accounting for charges which start immediately of £50 per month. She intends to draw £400 per month for herself for the first 2 months, £500 in the 3rd then 2 lots of £400 then £500 again. She is starting the business with 1000 in her bank.
  5. 5. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College Jan Feb Mar Apr May Jun Total Receipts Cash Sales 200 500 950 500 200 300 2650 Credit Sales 1000 5000 6000 4000 3000 19000 Capitol Introduced 3000 3000 Other Income Total Receipts 3200 1500 5950 6500 4200 3300 24650 Expenditure Payments to creditors 3000 2500 2000 2000 9500 Salaries/Wages 917 917 917 917 917 917 5502 Rent/Rates 250 250 250 250 250 250 1500 Water 60 60 Insurance 280 250 Repairs/Renewals 200 200 Heat/Light/Power 250 250 Maintenance 200 200 Printing/Stationery 200 200 Transport 150 150 150 150 150 150 900 Telephone 150 150 Professional Fees 200 200 Capital payments 4000 4000 Loan repayments 310 310 310 310 310 1550 Bank charges 50 50 50 50 50 50 300 Drawings 400 400 500 400 400 500 2600 Total Expenditure 6247 2477 5237 4977 4277 4177 27392 Net cash flow (3047) (977) 713 1523 (77) (877) (2742) Opening balance 1000 (2047) (3024) (2311) (788) (865) 1000 Closing balance (2047) (3024) (2311) (788) (865) (1742) (1742)
  6. 6. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College What is a Profit forecast? It shows the expected profitability of the business for a trading period – usually 12 months. In addition it provides other information to enable the performance of the business to be measured.
  7. 7. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College Why produce a profit forecast? It establishes the key performance measure of the business month by month. It informs decision making in relation to the management of overheads. It encourages efficient and effective control over expenditure. It focuses decision making by presenting financial facts.
  8. 8. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College Using the cash flow for Susan Brown at Dynamic Fabric complete her profit forecast.
  9. 9. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College Jan Feb Mar Apr May Jun Total Revenue [A] Cash Sales [B] Credit Sales [C] Total Revenue [A+B] [D]Materials and Stock purchased [E] Gross Profit [C – D] Gross profit %age [E/C]100 Overheads Salaries/Wages Rent/Rates Water Insurance Repairs/Renewals Heat/Light/Power Maintenance Printing/Stationery Transport Telephone Professional Fees Capital payments Loan repayments Bank charges [F] Total Overheads [G] Net Profit before drawings [E – F] Net profit %age [G/C]100
  10. 10. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College Jan Feb Mar Apr May Jun Total Revenue [A] Cash Sales 200 500 950 500 200 300 2650 [B] Credit Sales 1000 5000 6000 4000 3000 19000 [C] Total Revenue [A+B] 200 1500 5950 6500 4200 3300 21650 [D]Materials and Stock purchased 3000 2500 2000 2000 9500 [E] Gross Profit [C – D] 200 1500 2950 4000 2200 1300 12150 Gross profit %age [E/C]100 100% 100% 49.6% 61.5% 52.4% 39.4% 56.1% Overheads Salaries/Wages 917 917 917 917 917 917 5502 Rent/Rates 250 250 250 250 250 250 1500 Water 60 60 Insurance 280 280 Repairs/Renewals 200 200 Heat/Light/Power 250 250 Maintenance 200 200 Printing/Stationery 200 200 Transport 150 150 150 150 150 150 900 Telephone 150 150 Professional Fees 200 200 Capital payments 4000 4000 Loan repayments 310 310 310 310 310 1550 Bank charges 50 50 50 50 50 50 300 [F] Total Overheads 5847 2077 1737 2077 1877 1677 15292 [G] Net Profit before drawings [E – F] (5647) (577) 1213 1923 323 (377) (3142) Net profit %age [G/C]100 20.4% 29.6% 7.7%
  11. 11. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College Cash Flow Forecast Measuring performance Profitability: [Gross Profit/Sales]100 = Profit %age
  12. 12. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College Cash Flow Forecast Why the percentage changes: Increased selling prices Lower material costs Less waste
  13. 13. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College Cash Flow Forecast Reduction in percentage: Reduced prices Increased direct costs Stock losses
  14. 14. B R I A N W S T E E L developing higher performance The Start-up Programme – City of Bristol College Cash Flow Forecast Improving gross margin Annual sales x increase in gross margin £200k t/o 1% increase in GMP provides additional £2k profit.

×