Managing your business finance - NVI Wales Mentor session with Bevan & Buckland Chartered Accountants

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Information about Managing your business finance - NVI Wales Mentor session with Bevan &...
Economy & Finance

Published on April 4, 2014

Author: SarahToomey1

Source: slideshare.net

Description

Alison Vickers, Partner at Bevan & Buckland Chartered Accountants covered 'Managing your Finances'.

Including:
Understanding accounts – where has all the profit gone!
Setting financial goals
Cash flow and working capital
Profitability
Gearing and liquidity

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Managing your Business Finance Presented by: Alison Vickers Partner

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Agenda Understanding accounts Setting financial goals Cash flow and working capital Profitability Gearing & liquidity

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Understanding the Accounts (Profit & Loss) The financial statements consist of: Profit & Loss Account Sales (monies in) Less cost of sales (expenditure) Gross Profit Less overheads (expenditure) Net Profit

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Understanding the Accounts (Balance Sheet) Balance sheet This summarises all assets & liabilities at a given date Fixed assets – assets that have a life of more than one year Current assets – used in one year Stock Debtors (owed to you) Cash Current liabilities (monies you owe) Overdraft Creditors (suppliers) VAT Taxes

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Understanding the Accounts (Notes) Notes to the account The notes give more details on the figures in the profit and loss account and balance sheet

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Where has the Profit Gone? Scenario Set up a company Spend £500,000 on stock / asset Acquire a load for £40,000 to be repaid over 6 years (£682 pm) Hire purchase a vehicle (£475 pm) Profits of the Company £75,000 before “drawings” Director’s drawings £1,500 per month

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Where has the Profit Gone? (cont.) Profits / Cash Profit £75,000 Less directors drawings (£18,000) Less corporation tax (£ 8,000) Less loan repayment (£ 8,184) Less hire purchase (vehicle) (£ 5,700) Less £10,000 paid on asset (£10,000) Monies left £ 25,116

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Setting Financial Goals Turnover is vanity Profit is sanity Cash is KING

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Setting Financial Goals (cont.) Understand your costs Look to improve margins – set as higher gross profit as possible Produce short terms budgets / business plans Produce medium term business plans – with targets that are achievable Don’t “buy” work/sales Set targets that are ACHIEVABLE

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Cash Flow & Working Capital Every business will have a working capital cycle Monies will be locked up in Debtors Stock Prepayments Work in Progress Set up Costs How do you fund these costs? Bank loans / overdraft Creditors (suppliers) VAT is paid in arrears Corporation tax is paid in arrears Proprietors’ funds The better you manage the debtors, stock and work in progress the better your cash flow will be

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Profitability Know your costs There are hidden costs Employers NIC Pensions Corporation tax VAT Any sales / contracts – price fully Consider building in contingencies Understand the market place Be realistic in the director’s drawings – you cannot take profits that are not there

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Gearing & Liquidity As the business grows, you will want to show a positive picture Customers confidence Suppliers credit Bank funding The gearing on a business debt Debt / Equity Liquidity Rates The current ratio current assets current liabilities Acid test current asset - stock current liabilities

………………………………………………………………………………………………………………………………………... ………………………………………………………………………………………………………………………………………... 01792 410100 mail@bevanbuckland.co.uk www.bevanbuckland.co.uk Questions & Further Advice If you would like any additional information please contact me. Alison Vickers Audit Partner DL: 01792 410116 Mobile: 07814 003067 alison@bevanbuckland.co.uk

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