This document provides guidance to Mr. Carroll and Mr. Lowry on setting up their advertising agency, including financial processes. It recommends obtaining startup funding from banks, family, investors or grants. It outlines the need for a business bank account and finance department to manage cash flow, salaries, expenses and required financial documents like balance sheets, profit/loss statements and cash flow projections. Typical agency costs like office space, equipment and professional membership fees are also discussed.

1. Humpty Dumptyis now open!

2. FINANCIAL PROCESSES WHEN SETTING UP YOUR AGENCYOk this is the boring part of setting up your own agency.Dear Mr. Carroll and Mr.Lowry, to set up a business you are going to need to put some money before getting any. I know both of you have it, so I’m sure that won’t be a problem. And If not, you can borrow from banks, family and friends or attract outside investors. Grants and government support may also be available. Carroll, you are a good mathematician so you should be in charge of this.************* Of course, you'll need a business bank account. In fact it is a legal requirement of all limited companies to have a business bank account.

3. Once you have that money, you have to learn how to manage the cash flow, in order to keep the agency going. You should have a finance and accounts department then. This department is responsible for handling payment of salaries, benefits, vendor costs, travel, day-to-day business costs. You must also include your balance sheets, cash flow projections and profit and loss statements.Apparently approximately 70% of an ad agency's income pays salary and benefits to employees. However, this figure varies depending on the size and success of the agency .

4. This is a more detailed explanation of what I said above: Profit and loss accountThis measures your business' performance over a given period of time, usually one year.It compares the income of your business against the cost of goods or services and expenses incurred in earning that revenue. Balance sheetThis is a snapshot of your business' assets (what you own or are owed) and your liabilities (what you owe) on a particular.Cashflow statementThis shows how your business has generated and disposed of cash and liquid funds during the period under review.

5. InvoiceThey should also include the following:- a unique identification number - your company name, address and contact information - the company name and address of the customer you are invoicing - a clear description of what you are charging for - the date the goods or service were provided (supply date) - the date of the invoice -the amount(s) being charged -the total amount owed -VAT amount if applicable VATVAT (Value Added Tax or your national equivalent) is an issue warranting serious thought if your business is small enough to have a choice in the matter. Beyond a certain turnover (£68,000 as at 2010) any UK and Wonderland business must register for VAT. Statement of recognised gains and lossesThis records all gains and losses since the previous set of accounts. For example, changes caused by currency fluctuations, property revaluation, profits earned by associates and joint ventures not included in the normal accounts.

6. So this section should include how much you've made, your profit outlook for the future, etc. A lot of people use graphics to illustrate their financial background and projections.Lowry can do that.But before starting any brief you will need to spend some of that money: Buy or rent an office: one of the most important decisions: location, buying or not a property, etc.Equipment:It is essential that you have at least one computer with high speed Internet access, quality laser printer, telephone line and any other relevant equipment to make quality advertisements with. Member of an Official Advertising Institution, like the IPA It will cost you to join a professional advertising institution but this will benefit you greatly because they will give you endless advice about the advertising industry and it will show clients that you are a professional business.

7. All those costs are known as cash out ; there are two types of cash out:Fixed costs: rent, salaries.