Planning Your Finance

When you reach the detailed planning stages for your idea, you will need to think through a number of issues relating to money. Sources of finance may be uppermost in your mind, but considering how you are going to plan and manage your finances is just as critical.

How much money? 

As your planning develops you will have to work out how much money you need and when you will need it.

You will have to consider your start up costs and the costs of running your business. Premises, equipment and stock may represent significant capital outlay at the start-up stages and it may take time before you see returns on this investment.

Financial forecasts will help at this stage. Careful budgeting and cashflow forecasting should help you to plan the finance for your first year in business.

How much money do you need?

Find out how to plan your financial needs accurately and keep careful control of your cashflow.

Costing for start-up

As you start your business you will be dealing with two separate aspects of your finances.

Ӣ Your start-up costs

Ӣ Your running costs

What is a cashflow forecast?

A cashflow forecast is exactly what it says it is – a forecast of cash as it flows into and out of your business. Every known and anticipated transaction is recorded, usually over a period of a year. The shorter the period, the more accurate the forecast is likely to be. For the purposes of securing funding and longer-term strategic planning you may well have to produce a forecast for up to two or more years ahead.

Why do you need a cashflow forecast?

It is often remarked that in business ’cash is king’. It is possible that many fundamentally sound businesses can have poor cash flow, while businesses that are not quite as profitable can experience positive cash flow. Managing cash and demonstrating positive cash flow will be an important part of running your business and help you to feel less stressed by the financial implications.

Your cashflow forecast will also be a key part of your business plan and will almost certainly be required by any external investors. As the forecast is to a large degree your own judgement you must make sure that your reasoning behind the calculations is sound.