Business Planning using Spreadsheets-4 1 BP-4: Business Planning Three elements to Managing a Business:  ANALYSIS: requires collation of data (cash inflows/outflows)  PLANNING: requires incorporation of financial analysis into FUTURE plans.  CONTROL: involves comparing ACTUAL v FORECAST data (GAP Analysis) and taking corrective action (as necessary)

Business Planning using Spreadsheets-4 2 Importance of a Business Plan The BUSINESS PLAN is central to strategic decision making, it is an action plan which sets out the future objectives and forecasts of a business.

Business Planning using Spreadsheets-4 3 Purpose of a Business Plan-1 A Business Plan is essential for:  the EFFECTIVE MANAGEMENT and CONTROL of your business, i.e. it helps you to keep the business on the planned course by alerting you when something goes wrong  obtaining EXTERNAL FINANCIAL SUPPORT, i.e. convincing potential investors or your bank that you plans are both feasible and profitable

Business Planning using Spreadsheets-4 4 Purpose of a Business Plan-2 The Business Plan A Plan of Action Sets out future objectives A Plan of Action Sets out future objectives Effective Management Management Control (Actual v. Planned) Response to Changes Financial Support Expansion New Business Loan/Internal Funds Financial Support Expansion New Business Loan/Internal Funds

Business Planning using Spreadsheets-4 5 Elements of a Business Plan Two main elements of a business plan: 1. SUMMARY OF PAST PERFORMANCE: when the business started; its market; its profitability; its current strengths and potential weaknesses. 2. FORECAST OF FUTURE PERFORMANCE: its growth potential (expansion and/or new business opportunities); profitability; investment requirements; threats to growth.

Business Planning using Spreadsheets-4 6 Components of a Business Plan-1  Monthly SALES AND EXPENDITURE shows the projected level of sales and expenditure.  Monthly CASH FLOW STATEMENT shows when you will receive cash and when you have to pay it out. The purpose of the cash flow statement is highlight when you will need cash and identify your funding requirements, i.e. whether you will require a bank loan.

Business Planning using Spreadsheets-4 7 Components of a Business Plan-2  Monthly and Annual PROFIT AND LOSS ACCOUNT: shows the level of profit you expect the business to produce at the end of each period, according to the accounting records you keep. Because company accounts are not drawn up on a cash basis many of the figures in the profit and loss forecast will be different from those in the cash flow forecast.  Monthly and Annual BALANCE SHEET: shows what you owe (your liabilities) and what you own (your assets) at a particular moment in time.

Business Planning using Spreadsheets-4 8 BP – Bacchus Wines Case Study Will use the Bacchus Wines Case Study:  To explore some of the business concepts involved in constructing a Business Plan.  To construct spreadsheets for business planning and highlight some of advanced spreadsheet tools and functions.  As the basis for TMA and FMA.

Business Planning using Spreadsheets-4 9 BP – Assessment – Business Planning  TMA - Tutor Marked Assignment (25%)  Involves creating an historical Cash Flow Analysis for Bacchus Wines (i.e. based on past performance).  Review  Use of Functions  FMA - Final Module Assignment (75%)  Involves creating Forecasts for a Business Plan for Bacchus Wines (i.e. based on future performance).

Business Planning using Spreadsheets-4 10 BP-4: Spreadsheet Functions-1  Excel, Open Office Calc and other spreadsheet packages contain 100s of in- built functions which you can use in formulas and in your calculations.  Functions are used in formulas, either alone or in combination with other functions to calculate values for the cell, e.g:  Simple functions, e.g. =SUM(B2:B16)  Complex functions, e.g. charts

Business Planning using Spreadsheets-4 11 Spreadsheet Functions-2  Functions are made up of a function name, e.g. SUM, followed by the function’s argument enclosed in parentheses, e.g.: =Round(B2*C2+SUM(D2:G2),0) =IF(B2>C2,B2*3,C2*5)  The arguments in most functions are the values in other cells but they can include other types of data, such as numbers, text and even other functions.

Business Planning using Spreadsheets-4 12 Spreadsheet Functions-3  Database Functions  Date and Time Functions  FINANCIAL FUNCTIONS*  Information Functions  LOGICAL FUNCTIONS*  Lookup Functions  MATHEMATICAL FUNCTIONS*  STATISTICAL FUNCTIONS*  Text Functions  Trigonometric Functions

Business Planning using Spreadsheets-4 13 Inserting A Function-1  Select the cell where you want the function to be inserted, then either:  Click on the INSERT FUNCTION BUTTON on the Formula bar, or  Select INSERT FUNCTION on the Formula ribbon:  Finally select the function you require…

Business Planning using Spreadsheets-4 14 Inserting A Function-2