Management pocketbooks the business planning pocketbook phần 7 pptx

PLANNING PROCESS 7: FINANCIAL MODELLING BALANCE SHEET : EXAMPLE 64 Current assets (cash, investments, debtors, stock, prepayments) Less Current liabilities (tax, creditors, S/T debt, dividends) Net working capital Plus Fixed assets (plant, machinery, land and buildings, IT, etc) Less Creditors (loans, long-term creditors, deferred tax) Net assets financed by Shareholders’ (capital, retained profit, reserves) net worth £ m 50 (25) 15 100 (70) 45 45 PLANNING PROCESS 7: FINANCIAL MODELLING SOURCES & USES OF FUNDS This statement shows how an organisation funded itself through the year. In particular it shows: ● Where the money came from ● Where it went ● The duration of the funds in ● The maturity of funds out (to allow mismatch analysis) It is self-evident that sources and uses should by and large reflect the same timescale. It would be very foolish to borrow short-term (less than three months or even overnight) to fund a long-term (eg: five year) project. Interest rates would probably move against you, maturity of outflows would almost certainly occur at unfavourable times, and you might be unable to fund the project at any given time if there was a credit squeeze. Demonstrating that this aspect has been considered goes a long way to instilling confidence in you and your plan. 65 66 PLANNING PROCESS 7: FINANCIAL MODELLING SOURCES & USES STATEMENT Sources ● Pre-tax profit ● Depreciation ● Sales of assets ● Decrease in stocks ● Decrease in debtors ● Shares issued ● Increased loans ● Increased creditors Applications/uses ● Dividends paid/drawings ● Tax payments ● Loan repayments ● Decrease in creditors ● Increase in stocks ● Increase in debtors ● Purchase of assets PLANNING PROCESS 7: FINANCIAL MODELLING SOURCES & USES Key points - there are only four sources of funds: ● Cashflow from operations ● Asset sales Funds will not come from anywhere else, so any funding must be explained in these terms. Anyone looking at the plan will give especial attention to funding, as it is a lack of this that causes problems. This statement provides the link between the opening balance sheet, the profit and loss for the period and the closing balance sheet. Sources of funds are increases in liabilities (increase in borrowing/capital) or decreases in assets (release of funds, use of cash), Applications of funds are decreases in liabilities (repayments/payments) or increases in assets (purchases or extra cash). 67 ● Capital injection ● Debt NOTES 68 PRACTICAL PLANNING 69 PRACTICAL PLANNING STRUCTURING A PLAN When assembling a plan, you must think of those reading it - whether your colleagues, superiors, investors, creditors or suppliers. ● Does it say what you want it to say, in the best manner, portraying your organisation in the best light, truthfully but giving your readers the information that they need? ● Is all relevant information present and in an easily digestible form? ● Is there a logical flow? ● Does it support your objectives? Wherever possible, detail should be in appendices so as not to detract from the key messages, and to provide clarity and ease of reading. 70 PRACTICAL PLANNING STRUCTURING A PLAN Typical structure of a plan would be as follows: ● Summary ● Introduction and description of the business ● Market analysis ● Internal situation analysis ● Marketing plan ● Operational plan ● Financials ● Resource requirements ● Appendices An example using a company for illustration follows on the next few pages. 71 PRACTICAL PLANNING EXAMPLE COMPANY The example company operates in the brewing industry. ● It has a turnover of £150 million ● It has 80 employees ● The board consists of five executive directors (family) and three non-executives ● It has just introduced a role of planner, and put in hand a planning process, having undergone a strategic review last year ● It is based in the north of England where its market is primarily located The example is fictitious but intended to illustrate a plan. In the following pages extracts from its plan are shown. 72 PRACTICAL PLANNING STRUCTURING A PLAN STYLE OF SUMMARY ● The key objective is to get the readers’ attention and to make them wish to read on ● For very large organisations, the summary may itself be quite lengthy, in other firms quite short ● It should, however, be a stand-alone document which takes the readers by the hand and leads them to support the conclusion that you have drawn ● Many people will read nothing else, but the rest of the plan should support the summary, allowing them to ‘drill down’ for information 73 [...]...PRACTICAL PLANNING STRUCTURING A PLAN BREWING COMPANY SUMMARY , ht beer n draug 3% i s are by ft drink rket sh % in so e ma d7 reas beer an ✹ Inc ed bottled improv 5% in y 12%, sales b ion and enetrat ease in p ncr market solute i ✹ Ab % (from by 20 profits ) d costs age reduce w pack with ne ger eral led ace gen l ✹ Rep n ributio rce dist tsou ✹ Ou 74 . nothing else, but the rest of the plan should support the summary, allowing them to ‘drill down’ for information 73 PRACTICAL PLANNING STRUCTURING A PLAN BREWING COMPANY SUMMARY 74 ✹ Increase market. plan. In the following pages extracts from its plan are shown. 72 PRACTICAL PLANNING STRUCTURING A PLAN STYLE OF SUMMARY ● The key objective is to get the readers’ attention and to make them wish. organisations, the summary may itself be quite lengthy, in other firms quite short ● It should, however, be a stand-alone document which takes the readers by the hand and leads them to support the conclusion