2. Benefits of Financial Management Financial planning Financial control Informed decision-making Effective cost control Enhanced cash flow position Increased profitability Enhanced liquidity and solvency Improved financial performance

3. Overview of Financial Management Measuring Financial Performance Budgeting Bookkeeping and Tax Planning Online Banking Raising Finance Cash Flow Management How well are you doing How can you do better Planning for the future Managing your finances

4. Sales £50,000 Less cost of sales £15,000 GROSS PROFIT £35,000 Less overheads (including drawings) £30,000 NET PROFIT/LOSS £5,000 Summary Profit & Loss Account

5. Balance Sheet Fixed Assets Cost Depreciation Net value Equipment£5,000 £1,250 £3,750 Computer£1,000 £250 £750 Total fixed assets £6,000 £1,500 £4,500 Current Assets Cash at bank£5,894 Debtors£1,000 Stock£1,200 £8,094 Less Current Liabilities Creditors £1,500 Loan £3,344 £4,844 Total current assets £3,250 TOTAL NET ASSETS £7,750 Financed by Grants £750 Own Investment£2,000 Profit £14,600 Less drawings£9,600 TOTAL FINANCING £7,750

6. Gross Profit Sales Gross Profit Margin =100 Net Profit Margin = X Net Profit Sales 100X Ratios - Gross & Net Profit Margins

7. Profit before tax & Interest Total Assets (or Capital Employed) ROCE= 100 X Ratios – ROCE

8. Current Assets Current Liabilities Current Ratio = Ratios – Current and Quick Ratio Current Assets -stock Current Liabilities Quick Ratio =

9. Debtors Sales Debtors Collection Period = 365 Days Credit Payment Period = X Creditors Sales X Ratios – Debtors and Creditors Ratio 365 Days

10. Borrowing Net assets Gearing = Ratios – Gearing & Interest Cover Profit before Interest Interest Interest Cover =

11. The Four Five Rule Areas of Financial Performance Level of sales Average price of sales Cost of sales Level of overheads Application of the Four Five Rule Increase by 5% Decrease by 5%

12. Break – even Point Fixed costs Direct costs Total costs Sales Break-even

13. The Cash Flow Cycle Cash Inflows Cash Out flows

14. Cash Flow Difficulties Inflows Inadequate funding Poor credit control Slow debtor payments Poor profit margins Outflows High overheads Over expenditure Stock holding Over trading

15. Sale to Cash Conversion Period SaleOrder fulfillment Invoice Average debtor period Payment & deposit Time

16. Invoice promptly Set suitable terms of credit Agree credit terms with the customer Send statements Conduct credit checks Offer discounts for prompt payments Be proactive about customer relations Follow up sales Implement an after sales care policy Have sale agreements in writing Request a deposit Review debtors list Implement a credit control policy Improving the Sale to Cash Conversion

17. Managing Your Payables Delay payments where possible Negotiate extended credit terms Place surplus cash in a business reserve account Do not incur late payment fees or interest Keep your credit history intact

18. Reducing Costs Review and reduce costs habitually Minimise overheads Reduce stock holding Request discount Look for deals and special offers Shop around Evaluate all purchases to ensure they are an absolute requirement

19. Importance of Budgeting Identifies objectives and targets Identifies future requirements Facilitates cost control Assists with informed decision making Contributes to the financial planning process Sets a framework for monitoring and control

20. Types of Budgets Sales budget Materials/direct costs budget Overheads budget Capital expenditure budget

21. Budgeting Financial Tools Cash flow forecast Profit & loss forecast Balance sheet forecast Sales forecast

22. Budgeting - Monitoring & Control Time Sales Actual sales Budgeted sales Variance

23. Funding Sources Loans Overdrafts ENI Loan Fund Princes Trust Hire purchase Leasing Factoring & invoice discounting Investors Own/family investment Credit cards Grants

24. Elements of a Loan/Funding Proposal Summary Business description and history Personal profile Financial statements/accounts Financial projections Purpose of the loan Amount required Repayment plan

25. Preparing to Meet the Funder Have documentation prepared Fully understand your facts and figures Know what collateral you can offer, if appropriate Be professional Sell yourself Be prepared to answer questions Ask relevant questions

26. Importance of Efficient Bookkeeping Monitoring financial performance Informed decision making Obtaining finance Budgeting Preparing your tax return Cost control Credit control Financial monitoring and control

27. Computerised Bookkeeping Packages Excel Microsoft Money Financial Suite MYOB Quick Books Quicken Sage Simply Books Tas

28. Tax planning Prepare tax returns on time Utilise the services of an accountant Keep a record of all business expenses, and household running costs, if appropriate Set aside adequate money to pay the tax bill Implement a tax avoidance strategy

29. Benefits of Tax Software Packages Efficient Some are user friendly Calculates tax owed/due Assists with tax planning Does not require knowledge of tax bands and allowances Ability to conduct online returns Favoured by the Inland Revenue Free downloads and trials available

30. Services of Online Banking Transfer funds View account Check balance View transactions Pay bills Communicate with the bank via e-mail

31. Buying Goods and Services Online Know your merchant Check contact details Use a secure transaction Always use an Internet-friendly credit card Never give out your bank details