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Financial Management Step-by-Step


V1.1 2 © Young Enterprise 2010

Contents

1. Introduction...........................................................................................................................3

2. The Young Enterprise Financial Management System at a Glance.........................................3

3. Regular Management Accounts.............................................................................................5

3.1 General Principles..........................................................................................................5

3.2 Receipts: money coming into your company.................................................................6

3.3 Payments: money going out of your company..............................................................7

3.4 Paying Surplus Cash into the Bank (Transfer)................................................................8

3.5 Drawing Cash out from the Bank (Transfer)...................................................................9

3.6 Reports.........................................................................................................................10

3.7 Balance Sheet..............................................................................................................12



1. IntroductionCongratulations on your appointment as your company’s Finance Director. Although everyone in your company will have an important role to play, your job is vital, as you will be able to provide the information and guidance that the Board of Directors will need to enable them to make important decisions.

At first glance the online company accounts system may look rather complicated but please don’t panic, there is plenty of help on hand.

Firstly this guide has been written to try and make things as easy as possible. You should take time to read it through with your adviser.

Secondly you should not have to face this task alone. Ask the Board to appoint a Deputy Finance Director. This person should work with you and be able to take over if for some reason you are not able to attend a meeting.

Thirdly, and probably most important, your Advisers will be there to help and guide you. They will not of course do the job for you but hopefully at least one of them will have a financial background. Try and identify this person now. Go and introduce yourself. Try and book some time with this Adviser as soon as possible so that you can go through this guide together. If that is not possible, please make the effort yourself.

You will of course be aware that most businesses these days make full use of technology for accounting purposes and we have developed the online company accounts system to reflect this. The online accounts system will automatically do a lot of the calculating for you but it is very important that you understand what these figures mean, because it is your job to report on the company’s finances and explain them to your fellow Directors.

2. The Young Enterprise Financial Management System at a Glance

These options can be accessed through the Company Accounts section of the Company Programme Website. To use the on-line Company Programme finance section, please log in using your username and password:

www.yeonline.y-e.org.uk / – the same website for registering.

http://www.yeonline.y-e.org.uk/



This is the welcome page once you have logged in. Now click on View to take you to your Company:

Now click on Company Finances:

This takes you to the Company Finances page. Here you can download the Accounts System Instructions or click on the Accounts System:

From here you can input details of all Receipts and Payments, as well as producing monthly, interim and final accounts for your company.



3. Regular Management Accounts

3.1 General Principles

R e cord a ll m on e y trans a c t io n s Each and every transaction must be recorded somewhere in the Receipts and Payments tables.

It is expected that the majority of your transactions will be for cash, and that you will only buy or sell on credit rarely.

Rep o r t i n g of t r ansa ct i o ns One of your difficulties as Finance Director will be to ensure that all members of the company report to you all transactions they make.

Ban k ing your cashEach week when you receive cash, pay it into the bank right away. This is good business practice. It also makes book-keeping easier.

Kee p in g recor d s You must file and retain all receipts and invoices carefully. They are an important part of the company’s financial records. Always keep all documents which provide evidence of money received or paid out.

Why do things appear t w ice? You will see that the amount of money received appears on the forms twice, once on the left hand side of the form and again on the right hand side. This will be true for all amounts you enter in your accounting forms whether they are Payments or Receipts. You will have noticed that columns are headed DR (debit) or CR (credit). Any item that you enter in a debit column must have an equal or corresponding entry in a credit column. Similarly every credit item must always have an equal or corresponding debit. This is known as double entry book keeping.

Don’t forget that any cash that you are holding must be kept in a safe place.Try to borrow a cash box or even buy one if funds will allow. We recommend that when it is not being used the box is locked away in a secure place. Before you leave a meeting always ensure that you have personally handed the box over to whoever is going to be responsible and ensure that that

person is going to be available at your next meeting or when you will need cash.KEEP YOUR CASH SECURE



3.2 Receipts: money coming into your company

To enter details of money received in your receipts, click on the plus sign on the right of the screen. This will turn blue and you can enter the details. Remember to SAVE CHANGES after each transaction.

This Fo r m Is Used To Record all payments made to your company

F or E ach Tra n sa c t i on You S h o ul d Enter the Date of the transaction Complete the Where From column. This indicates where the money has come from. Enter the total amount paid in either the Cash or the Bank column.

o Use the Cash column if you have received casho Use the Bank column if you have received a cheque

‘Analyse’ the payment in columns 3 to 8. The totals of columns 1 and 2 must always equal the totals of columns 3 to 8.

Exam p l e R e c e ipts Tra n sactions

19th SeptemberYou sell 150 shares for a total of £150 cash (cash column)

19th SeptemberYou sell 6 clocks in cash for £36.

19th SeptemberYou sell a clock for £6. The clock is paid for by cheque (bank column).

See below for how these transactions should be entered into the receipts table.To delete an entry, click on the cross, and then Save changes.

To print a copy for your records, go to File and Print Preview, then Print.



3.3 Payments: money going out of your companyREPEAT THE ABOVE PROCESS TO ENTER DETAILS OF ALL PAYMENTS (Click on Payments)

To enter details of money paid out, click on the plus sign on the right of the screen. This will turn blue and you can enter the details. Remember to SAVE CHANGES after each transaction.

This Fo r m Is Used To Record all payments made from your company

F or E ach Tra n sa c t i on You S h o ul d Enter the Date for each transaction. Complete the What is it for column. This indicates where the money is being paid to. Enter the total amount paid out in either the Cash or the Bank column.

o Use the Bank column if you pay by cheque.o Use the Cash column if you pay by cash.

‘Analyse’ the payment in columns 9 to 13.

Exam p l e Pa y m en ts Tra n sa c t io ns

19th SeptemberYou pay your registration fee of £100 to Young Enterprise by cheque.

19th SeptemberYou pay for £35 of materials by cheque.

19th SeptemberYou pay £6.23 for some stationery by cash.

See below for how these transactions should be entered into the payments table:



3.4 Paying Surplus Cash into the Bank (Transfer)

This stage involves both the Receipts and Payments Tables.

Payments T a ble - you have wit h drawn y o ur cash to pay into your Bank Acco u n t • Enter the Date for each transaction.• Enter ‘Bank’ in the Where To column.• Enter the amount in column 8 - Cash.• Enter the amount in column 14 - Bank and Cash Transfers.

Rec e ipts Ta b le - your B a nk Acco u n t has r e cei v ed t h e m o ney • Enter the Date for each transaction.• Enter ‘Cash’ in the Where From column.• Enter the amount in column 1 - Bank.• Enter the amount in column 6 – Bank and Cash Transfers.

Exa m p l e – You pay £140 c a s h i n t o t h e bank on 15 t h O ct o b e r

Complete a slip in the Bank Paying-In Book ready to pay it into the bank. Paying surplus cash into the bank involves both handing money out (a payment), because you are reducing the amount of cash you hold, and receiving money into the Bank Account (a receipt).

Consequently this transaction needs to be recorded on both tables, Payments and Receipts

1. Payments T a ble : you have taken £140 cash out of the cash box to the bank account

Date Where To 7Bank

8Cash

............... 14Bank and

Cash Transfers

15-Oct-17 Bank £140 ............... £140

2. Rec e ipts Ta b le : You have paid £140 cash into the bank account from the cash box

Date Where From 1Bank

2Cash

............... 6Bank and

Cash Transfers

15-Oct-17 Cash £140 ............... £140

Remember to Save Changes.



3.5 Drawing Cash out from the Bank (Transfer)Should you ever need to draw cash out of the bank (for example you may need to draw out some change for a Trade Fair) the entries are similar but opposite to paying money into the bank.

This stage also involves both the Receipts and Payments Tables.

Payments T a ble - you have wit h drawn money from your B ank A c c o u n t to pay into the cash b ox • Enter the Date for each transaction.• Enter ‘Cash’ in the Where To column.• Enter the amount in column 7 - Bank.• Enter the amount in column 14 - Bank and Cash Transfers

Rec e ipts Ta b le - your c a sh box has re c ei v ed mo n e y • Enter the Date for each transaction.• Enter ‘Bank’ in the Where From column.• Enter the amount in column 2 - Cash.• Enter the amount in column 6 – Bank and Cash Transfers

Example – You withdraw £90 from your bank account on 15th October

Write a cheque to “CASH” for £90 which is what you need to withdraw the cash from your bank account. Take it to the bank.

Taking money out from the bank account involves both handing money out (a payment), because you are reducing the amount of cash in the bank, and receiving money into the cash box (areceipt). Consequently this transaction needs to be recorded on both tables, Payments and Receipts

1. Payments T a ble : you have taken £90 from the bank account into the cash box

Date Where To 7Bank

8Cash

............... 14Bank and

Cash Transfers

15-Oct-17 Cash £90 ............... £90

2. Rec e ipts Ta b le : You have paid £90 into the cash box from the Bank Account

Date Where From 1Bank

2Cash

............... 6Bank and

Cash Transfers

15-Oct-17 Bank £90 ............... £90

Remember to Save Changes.



3.6 Reports

To generate reports, click on Reports:

From here you can produce a number of reports:

Latest Monthly/Interim Reports

Click on Generate Reports to generate an up-to-date set of reports.

Then click on Profit and Loss Account/Balance Sheet as appropriate.



Profit and Loss account

This report shows how much profit or loss you have made and where that profit has come from.

The table below shows what each line in the profit and loss account represents.

A Total income from sales

B Total expenditure on purchases

C Estimated value of current stock

D How much the company has spent to produce all of the products/services which have been sold

E Total expenditure on stationery

F Total expenditure on Rent and Hire

G Total expenditure on miscellaneous

H Total expenditure on Registration Fee

Add in stock – value at cost.

This opens as a separate tab.To view, click on File and Print Preview.Print and store in your pack monthly.



3.7 Balance Sheet

This report shows the total ASSETS (what the company owns) and the total LIABILITIES (what the company owes).

The table below shows what each line in the Balance Sheet represents.

A Note about YE Winding Up Fee and Profits

At the end of the year a Winding Up Fee of 20% is calculated and companies must pay this to Young Enterprise. It is possible (but unlikely) that companies may be in a position at the end of the year where they would be owed money back to them. Unfortunately Young Enterprise is unable to pay any refunds back to companies at the end of the year.

The Balance Sheet should always balance!

This opens as a separate tab.To view, click on File and Print Preview.Print and store in your pack monthly.

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