The document provides information on business planning and financial planning. It defines planning as thinking about and preparing for future needs and actions. Financial planning for a business involves creating budgets, costing products, and sales and cost forecasts. It also includes making cash flow plans by projecting monthly cash inflows and outflows. Key parts of financial plans include distinguishing between fixed and variable costs, calculating direct material and labor costs, and determining starting capital needs based on equipment, materials, wages and other costs.

2.  What is planning?
 Planning means thinking and working out what to
do about something before happens.
 In your business, planning means thinking about
and working out what to do in the future to
improve your business

3.  You already have a plan in your business. For
example, before you buy goods or raw
materials you think about and work out:
 What goods or raw materials you need
 How much you need
 Where to buy the goods and materials
 How much the goods or raw materials will cost
 When do you need the goods or raw materials.
 Remember failing to plan is planning to fail

4.  Financial Planning consist of:
 Budgeting
 Costing a product
 Sales and cost forecast
 Cash flow plan

5.  A budget is a plan that outlines an
organization's financial and operational
goals.
 Making a budget helps a business allocate
resources, evaluate performance, and
formulate plans.
 For student companies just starting their
businesses, making a budget plays an
important role in determining their start up
capital and operating costs.

6.  The basic process of making a budget
involves listing the business's fixed and
variable (fluctuating) costs on a monthly
basis and then deciding on an allocation of
funds.

7.  Fixed costs are costs that will not change
even though the quantities of production
or purchase of products vary. The
following gives examples of fixed costs:
 Wages for the administration
 Rent of Buildings
 Loan repayment

8.  Variable costs are costs that change when
the quantities of production or purchase
change. The following gives examples of
variable (fluctuating) costs:
 Production wages (Direct Labour)
 Material costs
 Production costs (electricity)

9.  In order to come up with budget
calculations, the following information is
needed:
 Income related;
 Sales
 Loans
 Expenditure related;
 Types and quantities of equipment needed
 Types and quantities of raw materials
 Advertising/sales promotion
 Wages

10. BUSINESS PREMISES
Construction 500 000
EQUIPMENT
Fixtures (benches, shelves) 200 000
Oven 600 000
Tools for baking 100 000
OTHER
Raw materials 800 000
Advertising 50 000
Wages 150 000
Other costs 100 000
TOTAL 2 500 000

11.  The unit cost of producing a product is calculated by
finding the sum of direct and indirect costs of
producing the product or service. This is summarised
as:
Direct labour costs
+
Direct material costs
+
Indirect costs
=
Total production cost

12.  Direct material is all material that becomes
part of the product
Examples of direct materials are:
 Raw materials used in a product e.g. flour used
in baking a loaf of bread.
 Bought in parts and assemblies e.g tyres in car
manufacturing.
 Primary packing materials e.g a cooking oil
container.

13.  Below is an example of direct material costs
of making a loaf of bread.
Raw Materials Quantity Cost (K)
Wheat Floor 0.10Kg 450
Yeast 0.5Kg 100
Sugar 0.5Kg 100
Salt 0.2Kg 50
Charcoal 1Kg 500
Fat 010Lt 100
Total cost 1300

14.  This is the money the business spend on
wages, salaries, and the benefits of the
people who are directly involved in the
production of the product or service.
 Note that retailers and wholesalers don’t
have workers directly involved in the
production of the product or service.

15.  Here is an example based on the loaf of
bread:
WORKER TYPE OF
WORK
DONE
MONTLY
PAY
(K)
Direct
Labour
Cost (k)
Indirect
Labour
cost (K)
Bwalya Baker 30 30 -
Mulenga Baker 30 30 -
ZESCO Electricity 10 - 10
Jane packing 30 15 15
Total 100 75 25

16.  These are all other costs which add to the
unit cost of a product.
 Examples
 Rent
 Stationery
 Indirect labour e.g wages and salaries for
managers, sales person
 Insurance
 Licences

17. Using the calculations above, we could come
up with the unit cost of a loaf of bread as;
Direct labour costs 75
Direct material costs 1300
Indirect costs 25
Total production cost 1400

18. Refresher

19. "Never cry for any relation in life
Because for the one whom you cry
Does not deserve your tears
And the one who deserves
Will never let you cry........."

20. Treat everyone with politeness
Even those who are rude to you,
Not because they are not nice
But because you are nice........

21. "DON'T LET SOMEONE
BECOME A PRIORITY IN
YOUR LIFE...
WHEN YOU ARE JUST
AN OPTION FOR
THEM....."

22. “Happiness always looks small
When we hold it in our hands.
But when we learn to share it,
We realize how big and precious it
is! .....”

23. Back
To
Presentations

24. Details Jan Feb March April May June
K’000 K’000 K’000 K’000 K’000 K’000
Sales 2160 2160 2160 2160 2160 2160
Direct material
cost
280 280 280 280 300 300
Direct Labour
costs
100 100 100 100 100 100
Gross Profit 1780 1780 1780 1780 1760 1760
Indirect Cost 100 100 100 100 130 130
Net Profit 1680 1680 1680 1680 1630 1630

25.  In your respective groups go and formulate a
budget , cost your product or service and a
sales and cost forecast as part of your
business plan

26.  This is a forecast which shows how much
cash you expect to come (flow) into and
go (flow) out of your business each
month. It is the difference between the
receipts from the sales and the amount
spent on expenses such as raw material,
interest paid on loans, dividends paid to
shareholders etc. Money received into the
business adds to its capital reserves while
money paid out reduces them.

27. Cash In
(Receipts)
Cash Out
(Payments)

28. CASH
IN
Jan Feb Mar April May Jun
K’000 K’000 K’000 K’000 K’000 K’000
Cash at start of month - 1180 2860 4540 5920 7550
Cash in from sales 2160 2160 2160 2160 2160 2160
Any other cash in - - - - - -
Total cash in 2160 3340 5020 6700 8080 9710
CASH
OUT
Cash out for Dir. Mat 280 280 280 280 300 300
Cash out for dir. Lab. cost 100 100 100 100 100 100
Cash Out for Indir. Cost 100 100 100 100 130 130
Loan Repayment - - - - - -
Any other cash out 500 - - 300 - 400
Total cash out 980 480 480 780 530 930
Cash at end of month 1180 2860 4540 5920 7550 8780

29.  Cash at the start of the month- This is the
amount of cash a business expects to have in
cash or expects to have in their bank account
at the beginning of the month. The first
entry shows the invested money.
 Cash in from sales- This is cash realised from
sales during the months
 Any other cash in- this is the amount of cash
the business expects from any other sources
of income such as loan from the bank,
donations, grants to help you start the
business

30.  Total cash in- This is the sum of all the
cash coming in the business as cash at the
start of the month, cash in from sales,
and any other cash-in.
 Cash out for direct material cost- This is
the amount of money paid for the raw
materials only i.e. Materials used to
produce the goods e.g. flour for baking
bread.

31.  Cash out for direct labour cost- This is the
amount of cash a business is expecting to pay
the workers who are directly involved in the
production of the items or services. e.g.
working who are baking bread
 Cash out for indirect costs- This is the
amount of cash the business is expecting to
pay out for indirect costs (something not
directly involved in the production of goods)
such us electricity, and rent.

32.  Cash out for planned investment in
equipment- This is the money the business
has planned to spend in procuring equipment
e.g. a truck, stoves etc.
 Loan repayment- This is the money paid
toward the repayment of loans got
 Any other cash out- This is the money paid
out may be on renovation to the building

33.  Total cash out- This is the sum of all the cash
out of the business, that is;
 = Cash out for direct material cost + Cash
out from direct labour cost + Cash out for
indirect costs + Cash out for planned
investment in equipment + Loan
repayment + Any other cash out

34.  Cash at the end the end of the month- This
is the difference between the total cash in
and total cash out.
 Total cash in - total cash out = Cash at the
end of the Month.
 The answer from the calculation above
represents cash at hand and the bank
balance. It is the same figure which becomes
the cash at the start of the following month.

35.  In your respective groups, formulate a
detailed cash flow plan which should be part
of your business plan

36. END OF PRESENTATION:
ALL THE BEST:
BE ENTREPRENEURS NOT DAY DREAMERS