Financial plan as a part of Business plan (1/4)
The financial part of the business plan is one of most important parts. Every microenterprise should have a business plan with a detailed financial plan included.
Financial plan as a part of Business plan (2/4)
The Financial plan is constructed using the folllowing points:
- income statement,
- balance sheet,
- cash flow and budget.
All these documents contain essential information for the managers.
Financial plan as a part of Business plan (3/4)
The Balance sheet is a document that displays the financial situation of a company at a particular moment.
Financial plan as a part of Business plan (4/4)
The Income statement is a document which is constructed using all the income of the company and all expenses. This document is made for a defined period of operation of the company, usually a 12 month period.
The Income Statement can also be called a Profit and Loss Account
The Budget is one of the crucial parts of a business plan.
This document includes all items which are part of the business. This means that the budget should be constructed by predicting costs of all these items.
The Budget will give the manager data for all costs of the company for the planning period.
Technique of making a Budget (1/5)
Step 1: The technique of making a budget includes as a first step prediction of all items. This means that all items from biggest to smallest should be placed on the list.
Technique of making a Budget (2/5)
Step 2 : After prediction of the items they should be placed in different sectors or units. Those units are separated by types of costs.
Technique of making a Budget (3/5)
Step 3: After this step, the next one is to predict costs for the individual items. The technique for the prediction of the costs, include collecting data for costs for the items from different sources. Also, data from previous years can be taken for estimating costs for proposed items.
Technique of making a Budget (4/5)
Step 4: After the collection of data for costs of items for the budget, costs should be allocated to the period of implementation or period of procurement of the item. This will give information to the manager in which period of operation of the company costs will arise in order that they have enough funds for implementation.
Technique of making a Budget (5/5)
This is the main purpose of budgeting; to plan to have the correct resources available at the correct time.
If the managers control the company according to the business plan they will be prepared for all situations and will take actions at the right time.
Cash flow (1/4)
The Cash flow document is a table which includes all details of budget items and all details from income statement. This means that this is a summary of the flow of cash in and out of the company.
Cash flow (2/4)
From this Cash flow document managers can get a better overview of the financial situation in the company. This document also can be prepared for the upcoming period. This will present a prediction of the financial situation in the upcoming period and will give the manager time to prepare for possible situations.
Cash flow (3/4)
Also, the Cash flow will give information about seasonality of the business and in which period will there be higher incomes or outlays in the company.
Cash flow (4/4)
The Cash flow can also include instalments from loans or other costs which are different from current daily working of the company. This can have crucial meaning for a business with higher seasonality, because they can ask the banks to vary instalments according with seasonality.