business awareness programme finance- ‘how can i fund my idea’ research and enterprise
TRANSCRIPT
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Business Awareness ProgrammeFinance- ‘How can I fund my Idea’
Research and Enterprise
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Starting in BusinessBusiness Awareness
Workshop“How can I fund my Idea”
Research and Enterprise
Bernard Curren MCMIResearch and EnterpriseKnowledge & Innovation Manager
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Research and Enterprise
Today’s topic Finance and Accounts General introductions
Domestics Outline of the starting in Business
Awareness programme Outline of today’s Finance and Accounts
session
Starting in Business Programme
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Research and Enterprise
Finance and Accounts
Start-up Costs Personal Survival Budget
Cashflow Forecast Profit and Loss Forecast
Break Even Analysis Financial Management
Sources of Finance
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Research and Enterprise
Start-up Costs
Business purchase Franchise
Lease Purchase raw materials
Stock Purchase Fixed Assets
Re-vamp/redevelop Business Premises Assist with Cash flow (Working Capital)
Insurances
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Research and Enterprise
Further costs to consider
Rent in Advance, ingoing premium Shop fitting, sign writing, Power & telephone
connection Vehicles, Road Fund licence, vehicle insurance
Advertising & Promotion Legal and other fees
Probably some more!!!!!
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Research and Enterprise
Start-up Costs
Be realistic when estimating these costs
Don’t turn a blind eye to them, these are genuine costs
You have to find the money, its often pre-start-up, (before trading commences)
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Research and Enterprise
Start-up Costs
How this can be fundedPersonal Finances
Loans
Re-mortgage
Overdraft
Family/Friends
Grants
Redundancy
• Equity
• Trade Credit
• Leasing and Hiring
• Small Firm Loan Guarantee• Prime• Royal British Legion• Princes Youth Trust
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Research and Enterprise
Personal Survival Budget
This is the minimum take you have from the business The Business Plan will need to sustain this overhead
The PSB links with the following documents Business pricing structure
Cashflow Forecast Marketing Plan
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Research and Enterprise
Cashflow
Always remember…
Cash is King More Businesses fail through lack of
cashflow --- than lack of no customers
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Research and Enterprise
The Cashflow Forecast
This important document helps to: Establish the amount of money required and
when it is needed Ensure that capital expenditure is controlled
Encourage efficient use of resources Identify any shortfalls
Provides facts to help with decision-making
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Month 1 2 3 4 5 6 7 8
Income
Capital 2000
Loan 2000
Sales paid 0 500 1500 3000 4500 4000 4000 4000
Total Income 4000 500 1500 3000 4500 4000 4000 4000
Expenditure
Materials/purchases 1500 1500 1500 1500 1000 1250 1000 3000
Survival Budget 500 500 500 500 500 500 500 500
Salaries/ Drawings 0 0 0 0 0 0 0 500
Rent/rates
Insurances
900
600
900
600
900
Motor 2000 250 200 200 200 200 250 250
Total Expenditure 5500 2250 2200 3450 1700 2550 3050 4250
Net Cashflow -1500 -1750 -700 -450 2800 1450 950 -250
Opening Balance 0 -1500 -3250 -3950 -4400 -1600 -150 800
Closing Balance -1500 -3250 -3950 -4400 -1600 -150 800 550
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Research and Enterprise
The Profit & Loss Forecast
PurposeTo assess the profitability of a Business over a given
period of time.Format
Sales - Cost of Sales = Gross ProfitGross Profit - Overheads = Net Profit / (Loss)
MethodMatch sales income with the “Cost” of producing
that income
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Profit & Loss Forecasts cont Spread the costs across the time to which they relate.
Months 1 2 3 4 5Sales 1,000 1,000 1,100 1,500 2,000Purchases 500 500 550 750 1,000Gross Profit 500 500 550 750 1,000Insurance 100 100 100 100 100Rent 200 200 200 200 200
Motor Expenses 50 60 40 50 50Light & Heat 50 50 50 50 50Telephone 100 100 100 100 100Wages 150 150 150 150 150Profit / (Loss) (150) (160) (90) 100 350Cumulative P/(L) (150) (310) (400) (300) 50
…. No, it has made an overall profit of £50 for the 5 months
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Research and Enterprise
Preparing the P&L Forecast
Sales ForecastProduced fromMarket researchMarketing planPricing policyAssumptions
Sales - Cost of Sales = Gross Profit
Cost of SalesProduced fromSuppliers’ pricesUnit costsAssumptions
Overhead BudgetProduced fromKnown costsAnticipated additional costsAssumptions
Gross Profit - Overheads = Net Profit / (Loss)
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Breakeven ChartPounds
Sales Volume
Total Revenue
Total Cost
Losses
Fixed Cost
Total Variable Cost
Breakeven Point
Profits
20
60
100
140
150
10 2030
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Research and Enterprise
Breakeven ExamplesLevel of sales
Fixed Cost = stall rent + wages £12 + £12 = £24
Divided by Product price minus direct cost£5 - £3 = £2
Sales to breakeven 24/2 = 12 Units
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Research and Enterprise
Book-KeepingAsset RegisterSales Record
Purchase Record- Analysis book
- All in one accounts book- Computer based system
Record every transaction and asset acquisition with receipts.
Keep personal finances separate.Business Bank accounts
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Research and Enterprise
Professional SupportAccountant
Familiar with small businesses Recommend a book-keeping system
Clear about what they will charge you. What’s the alternative!!
Solicitor Strong commercial experience
Member of ‘Lawyers for Business’ scheme
Business AdviserBusiness Link 0845 6009966