MANAGING FINANCE

Managing Finance, Information and Knowledge



Managing Finance, Information and Knowledge

Introduction

In this paper, the focus would be on preparing projected Cash flows for three years along with the start-up cost, importance of working capital management and certain information that is important for prospective clients.

Discussion

Overview of the Company

Business that is selected to start is consultancy business that will specialise in Business/Market Intelligence and Knowledge Management.

Financial Projection of the Business

Start Up Business Cost

For starting a new business, start-up cost is essential. Owner should spend some time to estimate the total capital needed to establish a business. This is one time cost and without these costs business would not be able to proceed (Brigham, Houston, 2012, p. 512).

For Consultancy Business following are the start-up cost.

Start-up Cost

Start-up Expenses

 

Legal Expense: Incorporation and Books

£ 250

Stationery, Basic Office Supplies, etc

£ 200

Printing and Design

£ 1, 400

LAN, Wireless Network Setup

£ 450

Business Insurances

£ 120

Deposit of lease: first Month

£ 4, 400

Market Research

£ 1, 000

Web-site hosting

£ 98

Computer, Printer, other Expensed Equip

£ 3, 500

Total Start-up Expenses

£ 11, 418

 

 

Start-up Assets

 

Cash requirement

£ 50, 000

Total Assets

£ 50, 000

 

 

Total Start-Up Cost

 

£ 61, 418

Start-up Funding

 

Total Start-up Expenses

£ 11, 418

Total Assets

£ 50, 000

Total Funding Required

£ 61, 418

Assets

Cash Needed

£ 50, 000

Cash Balance At Start

£ 50, 000

Total assets

 

£ 50, 000

Liabilities and Capital

Long-term Liabilities

£ 35, 000

Outstanding Bills

£ 0

Current Liabilities

£ 0

Total Liabilities

£ 35, 000

Owner's Investment

 

£ 26, 418

Start-up Expenses

 

£ 11, 418

Total Capital

£ 15, 000

Total Capital and Liabilities

£ 50, 000

Total Funding

 

£ 61, 418

The above mentioned are start-up cost that are essential for consultancy business. All these cost assumptions has been based on market trend.

After the start-up cost, on bases of certain assumptions, forecasted cash flow will be prepared. This cash flow will estimate expected sales and cost associated with the business during the year.

The following is the Forecasted Cash Flow for Consultancy Business.

Consultancy Business

Forecasted Cash Flows

 

2013

2014

2015

Cash Receipts

 

Fee (income)

£ 750, 000

£ 1, 500, 000

£ 2, 250, 000

Total Cash Receipts

£ 750, 000

£ 1, 500, 000

£ 2, 250, 000

 

 

Cash Disbursement

 

Capital Expenditure

£ 1, 375, 000

£ 25, 000

£ 625, 000

Administrative staff

£ 137, 500

£ 198, 275

£ 291, 748

Consultant staff costs

£ 600, 000

£ 1, 030, 000

£ 1, 697, 440

Consultancy expenses

 

Fixed

£ 20, 000

£ 20, 000

£ 20, 000

Variable

£ 5, 000

£ 10, 000

£ 15, 000

Total Consultancy Expense

£ 25, 000

£ 30, 000

£ 35, 000

Total Cash Disbursement

£ 2, 137, 500

£ 1, 283, 275

£ 2, 649, 188

 

 

Total Cash Receipts

£ 750, 000

£ 1, 500, 000

£ 2, 250, 000

Total Cash Disbursement

£ 2, 137, 500

£ 1, 283, 275

£ 2, 649, 188

Net Cash flow

-£ 1, 387, 500

£ 216, 725

-£ 399, 188

The above cash flow of consultancy business shows that in 2013, they will have a deficit net cash flow amount due to higher Capital Expenditure. In 2014, company expects that their cash receipts trend will increase with 100% and with 50% in 2015. Cash Disbursement trend in 2014 will reduced since company would not need high amount of additional capital expenditure. Nevertheless, company will experience negative cash flow in 2015 as well due to higher expenditure. This should be noted that their number of staff and Consultant has been increasing ...