1. Operating Finance

2. Need to know:
Opening the bank account
Taxation
Insurance

3. Opening a Bank Account Complete a bank mandate form
Authorised signatures
Copy of Memorandum and Articles of Association
Certificate of Incorporation
Name of the account

4. Taxation Income Tax – Sole Traders and partnerships
Corporation Tax – Limited Companies on profits
Value Added Tax – All Businesses in excess of certain threshold
PAYE/PRSI – Employees etc.

5. Calculating Taxable Profits
Taxable profits are calculated by deducting allowable business expenses from turnover. These include:
Purchase of goods for resale
Wages, rent, rates, repairs, lighting, heating
Running costs of vehicles or machinery used in the business
Accountancy and audit fees
Interest paid on any monies borrowed to finance business expenses
Lease payments on vehicles or machinery for business

6. PAYE/PRSI
Operates on the basis that an employer deducts tax at a specified rate from an employee’s pay.
Must register for PRSI/PAYE
Need to make payments and returns to Collector-General

7. VALUE ADDED TAX Taxable Persons Rates of VAT Register for VAT
Returns to the Collector General

8. NEED TO KEEP… Records Returns Information for Revenue Audits
Record of transactions
Quality Credit Control
Correct financial books
Trading Account, P&L Account, Capital Account, Balance Sheet
Financial Software

9. Insurance Business Insurance Fire Burglary/theft All risks
Public liability
Product liability
Employer’s liability
Motor Insurance

10. Financial Statements

11. Types of Statements Cash Flow Profit & Loss Balance Sheet
Break Even Analysis
Initial Investment
Sources of Funding Proposal

12. Cash Flow Statements

13. Managing Small Business Accounts
Cash Method
Only records income when cash is received
Only records expenses when payment is made
But what about credit?
Accrual Method
Sales recorded as sale made or items ordered
Expenses recorded when order made

14. Cashflow Forecast
Gives a monthly snap shot of the amount of money coming in and going out of the company’s bank account
Note the positive or negative cash flow

15. Opening Balance Jan Feb March April
Income
Cost of Sales
Rent
Heating, Lighting, Water
Tel., Internet
Professional Fees
Bank Charges
Wages
Material
Equipment
Transport
Total Cost
Closing Balance

16. Notes to Cash Forecast
Opening Balance for each month to be brought forward amount from the previous month’s closing balance
Sales may be up front, payment with purchase or 1, 2 or 3 months after sale – depends on type of business
Office rent usually one month in advance
Heating, Lighting and water usually give one month credit
Telephone, Internet usually one month credit
Professional Fees usually two months credit
Bank charges and credit cards usually one month credit

17. Notes to Cash Forecast Wages and salaries usually same month
Material costs – varies but usually one month
Equipment – varies – 1, 2 or 3 months
Transport costs – varies – up front etc.

18. Stocking / Destocking
Stocking – Gearing up of materials and stock to supply increasing sales (may take a few months before positive effect realised)
Destocking – Winding down of stock as sales reduce (effect seen immediately)

19. Information required for cash flow forecasting
Easy to get for some expenses e.g. insurance, selling, administrative etc.
Owner/manager source of information
Trade Journals
Note seasonality
Avoid Estimating - aim for factual information as much as possible

20. Profit & Loss Account Sales (volumes or values) Cost of Sales
Fixed Overheads
Variable overheads

21. Business Name
Profit & Loss Account
Year 1 Year 2 Year 3 Year 4
Sales
Cost of sales
Gross Profit
Gross Profit %
Overheads
Staff
Production
Premises
Transport
Selling and promotion
General Expenses
Finance
Depreciation
Total Overheads
Net Profit/ (Loss)
Tax on profit / (Loss)
Profit retained for Business

22. Break-even Analysis Sales Price: Can this be increased?
Sales Volume: Can this be increased?
Cost of sales: Can this be reduced?
Overheads: Can this be reduced?

23. Break-even Analysis Fixed Costs Machinery, salaries, rent, marketing
Variable Costs
Labour, materials and variable overheads
Income
Turnover

24. Break-even Analysis Contribution per unit sale Equals:
Income per unit sales-variable costs
Breakeven Point
Fixed Costs
Contribution per unit sales

25. Balance Sheet
A snap shot of the balance between the company’s assets and the company’s liabilities on any particular day
Fixed Assets
Capital items not yet paid for
Current Assets
Actual cash in hand, actual amounts owed (debtors), Stock-in-hand (Unpaid stock as liability under creditors)

26. Balance Sheet
Capital
Shareholders capital –amount invested in business
Retained earnings – profit or loss as recorded
Term Liabilities
Loans not due for repayment in this current year

27. Balance Sheet Current Liabilities Bank overdrafts, Tax payable
Creditors

28.
BALANCE SHEET
Fixed Assets
Property
Plant, Machinery, Vehicles
TOTAL FIXED ASSETS
Current Assets
Bank Accounts
Stock
Debtors
TOTAL CURRENT ASSETS
Capital
Shareholders Capital
Retained Earnings
TOTAL CAPITAL
Term Liabilities
Loans
Current Liabilities
Bank Overdraft
Tax Payable
Creditors
TOTAL LIABILITIES

29. Initial Investment Summary
€ €
Fixed Assets
Property
Renovations
Fixture & Fittings
Transport
Machines and equipment
Goodwill, security deposits
Other
Total Fixed Assets
2. Current Assets
Stock of raw material
Stock of finished goods
Work in progress
Debtors
Total Current Assets
3. Liquid Assets
Cash
Bank
Total Liquid Assets
4. Start-up costs
Prepaid expenses
Promotion, opening
Total Start-up costs
Margin for unforeseen costs

30. Investment : Sources of Funding€
Internal
Personal Assets
Fixed assets
Car
Additional private mortgage
Deferred loans (family)
Other
Total person assets
Introduced as:
Equity
Loans
External
External equity Agreed
Source Y/N
External Debt (Long term) Agreed
Mortgage Y/N
Loan Y/N
Leasing Y/N
Other Y/N
External Debt (Short term) Agreed
Overdraft Y/N
Suppliers' credit Y/N
Payments received in advance Y/N
Subsidies/Grants Agreed
Agency Y/N
Enterprise Board Y/N

31. Project Accounts WBS Breaks down the work into different packages.
Each package can be assigned to a department or person
Business Plan
Short term estimates
Long term estimates
Feasibility of Project

32. Project Accounts Estimate Direct Costs Indirect Costs Labour Costs
Procurement Costs
Time related costs
Unit Rates
Factoring
Estimating factoring

33. Project Accounts Sources of Finance Personal Investors State Agencies
Partners
Angels
Venture Capital

34. Business Plan should help answer following questions:
Who are you?
What is your product or service?
Who are your customers?
Why will your customers buy my product or service?
What price will your customers pay for your product or service?

35. Business Plan should help answer following questions:
At this price, how many products/services will your customers buy?
How many products/services can you make?
How much does it cost to make/deliver each unit of product/service?
How much start-up investment does the business need?
Is this a viable business?