Business Planning Budgeting Provided by CDI
Objectives In this unit, we will have a look at different financial documents which are integral part of the business plan with emphasis on the budget as the most valuable financial document
Learning outcomes At the end of this module you will be able to: Make basic budgets Know how to read budgets and how to use them Know how to make budget and cash flow
Financial plan as a part of Business plan (1/4) The financial part of the business plan is one of most important parts. Every social farm should have business plan with detailed financial plan included.
Financial plan as a part of Business plan (2/4) Financial plan is constructed by the several points like: income statement, balance sheet, cash flow and budget. All those documents are from essential meaning for the managers.
Financial plan as a part of Business plan (3/4) Balance sheet is a document that expose situation in company in that moment.
Financial plan as a part of Business plan (4/4) Income statement is document which is constructed from all incomes in the company and all outcomes. This document is made for an exactly defined period of working of the company.
Budget (1/2) A budget is a financial plan for a defined period of time Budget is one of the crucial parts of business plan. In this document are included all items which are part of the business. This means that budget should be constructed from all items and should be predicted all costs for them.
Budget (2/2) Budget will give to the manager data for all costs of the company for the planning period. http://library.ku.ac.ke/wp-content/downloads/2011/08/Bookboon/Accounting/budgeting-and-decision-making.pdf
Technique of making Budget (1/5) Step 1 is prediction of all items in budget making. This means that all items from biggest to smallest should be placed on the list.
Technique of making Budget (2/5) Step 2 is placing the items in different sectors or units. Those units are separated by types of costs.
Technique of making Budget (3/5) Step 3 is to predict costs for the 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 into consideration for making costs for proposed items.
Technique of making Budget (4/5) Step 4 is allocating the costs to the period of realization or period of procurement of the item. This will give information to the manager in which period of working the company should have enough funds for realization.
Technique of making Budget (5/5) If the managers lead the company according to the business plan they will be prepared for all situations and will take actions right on the time.
Cash flow (1/4) Cash flow document is a table where are included all details about budget items and all details from income statement. This means that this is some kind of summary for incomes and outcomes in the company.
Cash flow (2/4) From this document managers can take better review for financial situation in the company. This document also can be prepared for the upcoming period. This will present prediction of financial situation in upcoming period and will give to the manager time to prepare for some situations.
Cash flow (4/4) In cash flow also can be included instalments from loans or other costs which are different from current daily working of the company. This is from crucial meaning for business with higher seasonality, because they can ask from the banks to make instalments according with seasonality.
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