Finance for non financial managers course- Financial planning
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Transcript of Finance for non financial managers course- Financial planning
www.businessservicessupport.com
FINANCIAL PLANNING- HOW TO
PRODUCE FINANCIAL FORECASTS
PART OF FINANCE FOR NON FINANCIAL
MANAGERS COURSE PROGRAMME
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KEY OBJECTIVES
What is financial planning
Benefits of financial planning
How to put together a financial plan
Practice illustration of financial plan
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DEFINITION OF FINANCIAL PLANNING
Concern with the determination of
financial resources required to deliver
business goals and objectives
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WARNING- FINANCIAL PLANNING TIPS
Financial planning must be preceded by a business plan
Effective financial plans starts from clearly understanding the vision and mission of a business
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Help businesses analyse resources
Help businesses determine viability
Action plan for financial weaknesses
Financial resources for meeting goals
How much resources required for investment
OBJECTIVES OF FINANCIAL PLANNING
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FINANCIAL PLANNING V EXTERNAL
ENVIRONMENT
Questions To Be Asked In Regard PEST Analysis:
Political
Economical
Social attitudes
& Changes
Technology
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A SIMPLE APPROACH FOR PREPARING
FINANCIAL PLAN
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What resources are required
The competition
profile
Key suppliers of resources
The market profile
The political regulations and
economic conditions
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SETTING REALISTIC ASSUMPTIONS FOR
FINANCIAL PLANNING
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Sales Turnover Forecast
Expenditure Forecast
Cash Flow Forecast
Income and Expenditure
Accounts (P&L) Forecasts
Balance Sheet Forecast
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PRACTICAL EXAMPLE FOR PUTTING
TOGETHER SALES FORECAST
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English Courses:
No of students (demand for English courses)
500 Students
No of course hours ( i.e. The number of hours students will spend studying the courses)
400 hours
Course fee per student £100
Total sales income forecast £ 50,000
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PRACTICAL EXAMPLE FOR PUTTING TOGETHER
SALES FORECAST
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ICT Courses:
No of students (i.e demand for ICT courses)
200 Students
No of course hours ( i.e. The number of hours students will spend studying the courses)
80 hours
Course fee per student £50
Total sales income forecast £ 10,000
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PROFILING SALES INCOME FORECAST
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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
£ £ £ £ £ £ £ £ £ £ £ £
5000 6000 9000 20000
Sales
Income
Financial
Year
2007/08
January £5000
February £5000
March £5000
April £5000
May £5000
June £5000
July £5000
August £5000
September £5000
October £5000
November £5000
December £5000
Total £60,000
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Staff Name
Post TitleGross
SalariesEmployer’s
NICEmployers Pensions
Total Salary
Peter Jones
Manager £14,000 £500 £500 £15,000
Denis Bill Tutor £9,200 £200 £200 £9,600
Total £23,200 £700 £700 £24,600
PRODUCING ANNUAL SALARIES FORECAST
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ANNUAL EXPENDITURE FORECAST
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Expenditure Assumptions £
Salaries:
Admin 1 (part time)
Manager
15,000
Tutor 2 (part time) £10 per hour x 480
hours
9,600
Marketing & Sales 10,000
Rents £300 per month 3,600
Office & Training Equipments 10,000
Utilities (telephone etc) 1,200
Stationery £60 per month 720
Insurance 400
Professional fees (legal,
accountancy etc)
10,000
Other expenses 10,000
Total 70,520
Summarise your assumptions here:
1. Staffing : 1 Office Manager & 2 tutors (all part-time)
2. Prices of goods and services are based on current market conditions.
3. All cost types have been carefully researched.
4. Professional fees include all types of professional advice required from
the stage of setting up the business etc.
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PROFILING EXPENDITURE FORECAST
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Expenditure Financial
Year
2007/08
January £15043.33
February £5043.33
March £5043.33
June £5043.33
July £5043.33
August £5043.33
September £5043.33
October £5043.33
November £5043.33
December £5043.33
£70,520
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PUTTING TOGETHER PROFIT & LOSS
ACCOUNT FORECAST
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£ £ Commentary
For Users
Sales £60,000 See total
income forecast
Cost of Sales (tutors salaries) 9,600 This is a direct
cost of training
services
Gross Profit 50,400
Administration & Overheads
Admin Manager 15,000
Marketing & Sales 10,000
Rents 3600
Office & Training Equipments (depreciation) 2500 See note below
Utilities (telephone etc) 1200
Insurance 400
Stationery 720
Professional fees (legal, accountancy etc) 10,000
Other expenses 10,000 53,420
Net Profit 3,020
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PUTTING TOGETHER OF CASHFLOW
FORECAST
WHAT IS CASH-FLOW FORECASTING
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A projection of actual cash receipts against cash payments
A measurement of liquidity
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PUTTING TOGETHER THE CASH FLOW
FORECAST
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Key questions:
•When do you expect to receive the sales income in your sales forecast?
• When do you expect to pay suppliers for goods and services you will purchase?
•What will be your credit policy? In short, will customers be given credit and if so how many days?
•Are the credit terms extended to customers too generous or competitive?
•Is there a plan to raise capital for the business from third parties?
•Who are the main financiers of the business?
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CASH FLOW FORECASTS IN PRACTICE
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Description Jan- March 07 April-June 07 July-Sept 07 Oct-Dec 07 Total
£ £ £ £ £
Balance brought fwd -12630 -10260 -12890
Cash Receipts
Sales income- training 10000 15000 15000 15000 55000
Total Receipts 10000 15000 15000 15000 55000
Cash Payments
Salaries
Admin Manager 3750 3750 3750 3750 15000
Tutor 2400 2400 2400 2400 9600
Marketing 2500 2500 2500 2500 10000
Rents 900 900 900 900 3600
Equipment 10000 10000
Utilities 300 300 300 300 1200
Stationery 180 180 180 180 720
Insurance 100 100 100 100 400
Professional fees 2500 2500 2500 2500 10000
Other Expenses 5000 5000 10000
Total payments 22,630 12630 17630 17630 70520
Cash Book Balance -12630 -10260 -12890 -15520
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BALANCE SHEET FORECASTS 2007/08
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Fixed Assets £ £
Office & Training Equipment
10,000
Depreciation ( 2500)
Net Book Value 7500
Current Assets
Debtors 5000
Cash (16000-15520) 480
5480
Current Liabilities 12980
Creditors 0
Long-Term Liabilities 16000
Loss in the year (3020)
12980
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BALANCE SHEET FORECASTS CONTD
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Office Equipment – Is an asset and the full costs should be recorded in the balance sheet. It is a
tangible item used to create income.
Depreciation- this represents the reduction in the value of the equipments to recognise their
contribution toward income generation. Some assets appreciate in value in real life and so there may
be justification not to make any adjustments for depreciation.
Current Assets- This is a mixture of different types of sub-assets. Debtors are monies owed to the
business- refer to the cash flow forecast. Cash balance is the difference between the loan of £16000
and the shortfall shown in the cash flow forecasts before the loan.
Long-term liabilities- represent the amount of loans borrowed from the bank.
Loss in the year- is the difference between the sales forecast and expenditure forecast shown in the
profit and loss forecast statement.
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CONCLUSION – THE END
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