financial forecasting & planning
Introduction
Financial forecasts are, quite simply, your forecast of how your business will perform financially over, say, the year ahead.
Preparing forecasts will help you to assess your likely sales income, costs, external financing needs and profitability. Financial forecasts are essential if you need to raise money from a third party, such as a bank. But they also provide you with the means to monitor performance on, say, a monthly basis and thereby exercise effective financial control - arguably the second most important management function in running a business.
Objectives
The aim of this section is to help you to prepare financial forecasts. It will enable you to:
• Understand costing and pricing;
• Use break-even analysis as a way of setting sales targets;
• Understand financial forecasting; and,
• Assess working capital requirements.
Assignment
The purpose of these assignments is to ensure that you are able to prepare the necessary financial forecasts for your business.
Satisfactory completion of the set of assignments will demonstrate that you know and understand how to:
• Identify and calculate the financial outlines it will be necessary to prepare.
• Calculate your own personal survival budget.
• Determine the funding/materials requirements of starting in business.
• Consider how you will take and keep effective financial control of the business.
• Consider and plan to deal with alternative scenarios.
1. Personal budget
How much money do you need for yourself. Think about food, clothes, holidays, personal travel, etc. Draw up a personal budget. Don’t skimp. You may be in business to have fun – but you need to make money as well. Use this budget in calculating your costs and prices. Of course you may not have enough sales at the start to be able to take that amount of money, so you should also calculate the minimum requirement that you must take from the business.
2. Costing and pricing
Calculate all your
Financial forecasts are, quite simply, your forecast of how your business will perform financially over, say, the year ahead.
Preparing forecasts will help you to assess your likely sales income, costs, external financing needs and profitability. Financial forecasts are essential if you need to raise money from a third party, such as a bank. But they also provide you with the means to monitor performance on, say, a monthly basis and thereby exercise effective financial control - arguably the second most important management function in running a business.
Objectives
The aim of this section is to help you to prepare financial forecasts. It will enable you to:
• Understand costing and pricing;
• Use break-even analysis as a way of setting sales targets;
• Understand financial forecasting; and,
• Assess working capital requirements.
Assignment
The purpose of these assignments is to ensure that you are able to prepare the necessary financial forecasts for your business.
Satisfactory completion of the set of assignments will demonstrate that you know and understand how to:
• Identify and calculate the financial outlines it will be necessary to prepare.
• Calculate your own personal survival budget.
• Determine the funding/materials requirements of starting in business.
• Consider how you will take and keep effective financial control of the business.
• Consider and plan to deal with alternative scenarios.
1. Personal budget
How much money do you need for yourself. Think about food, clothes, holidays, personal travel, etc. Draw up a personal budget. Don’t skimp. You may be in business to have fun – but you need to make money as well. Use this budget in calculating your costs and prices. Of course you may not have enough sales at the start to be able to take that amount of money, so you should also calculate the minimum requirement that you must take from the business.
2. Costing and pricing
Calculate all your