88
Franchise Services
Menzies
Website:
e
s
www.menzies.co.uk
Email:
r
v
i
c
jcheung@menzies.co.uk
phone:
020 8974 7500
classification:
Accountancy
a
n
c
h
i
s
e
s
e
f
r
The cash ow forecast will enable you
to identify when your need for cash is at
its greatest, and allow you to arrange for
appropriate funding to be put in place.
It should be remembered that cash ow
is not the same thing as pro t, and that a
Financial forecasting
pro table business can still fail if it doesn’t
have the cash ow to keep its operations
going. Cash is the lifeblood of the business.
Jenny Cheung, senior manager at Menzies, assesses the
Profi t and loss
The pro t and loss forecast should show the
implications of the current economic uncertainty pro t/loss you will make in an accounting
period. It is derived by accounting for all
T
HERE HAS been much in the press The fi nancial forecast can be “No matter sales made in the period (net of VAT) and
about businesses experiencing used to:
what stage of
the related expenses incurred in the period
hardship as a direct result of
●
Assess how viable the franchise will be (net of VAT). It should be noted that revenue
current economic uncertainty. As a business
●
Identify how much you need to
the business
or expenses accounted for in the period
adviser, I have seen businesses experience generate to be able to make a living cycle you are not re ective of the cash movement
a mixed bag of fortunes. Whilst some are
●
Provide guidance on basic business
are at, it can
– eg a sale made on the last accounting day
tightening their purses, others are actively decisions (eg implications of signing up would be recognised within the accounts as
seeking to capitalise on the current market to lease commitments etc)
never be over
revenue, but the 30 days credit offered may
turmoil by acquiring their competitors and
●
Help to pinpoint areas of potential emphasised mean that funds are not received until after
strengthening their market position. cash savings
how important
the accounting period.
A number of people have also taken this
●
Raise money
opportunity to consider a change of career,
●
Co-ordinate activities and allow
preparing and
Balance sheet
and are looking at franchising as a route to planning to ensure the business’s maintaining The balance sheet provides a snapshot of
becoming their own boss. objectives can be achieved
nancial
the businesses assets and liabilities at a given
No matter what stage of the business
●
Serve as a vision for other employees point in time. It enables people to identify
forecasts for
cycle you are at, it can never be over to follow the strength of a business and is often used
emphasised how important preparing
●
Establish a system of control and to
your business for credit rating purposes and by banks
and maintaining nancial forecasts for motivate employees
is”
when making lending decisions.
your business is. While franchisors may It is normally recommended that nancial
provide prospective franchisees with a forecasts are prepared for a minimum of Seeking help
standard forecast, it is important that you 24 months to enable you to identify any Given the tighter lending criteria being
tailor the forecast to your own personal shortcomings in your business model during operated by the banks, and the level of
circumstances, and to the territory you are the short term (eg failure to break even, investment you are making (money, time and
looking to operate from. running out of cash etc). effort), it is recommended that you work in
conjunction with an accountant to prepare
What is fi nancial forecasting? The nancial forecast is made up as follows: nancial forecasts for your business. Your
Financial forecasting is the process of accountant will be able to ag any issues
estimating the results of your business Cash fl ow forecast which need to be addressed to give your
based on a set of parameters (eg estimate The cash ow forecast records when you business its best shot at success. Tax advice
of future sales, costs, cash balances etc). expect to receive monies and when you can also be provided to ensure that you
Careful thought should be given to these expect to pay it out. When preparing the nance the business and extract pro ts in
parameters to ensure that they are realistic cash ow forecast, consideration needs to the most tax ef cient manner.
and can be supported. be given to the following parameters:
●
Sales forecasts and payment terms Jenny Cheung is a senior manager at Menzies,
Do I need one?
●
Business expenses, their frequency and a British Franchise Association-af liated rm
Yes. Having a map will help you to get from payment terms of accountants. She can be contacted on 020
A to B easier, otherwise you could nd
●
The implications of VAT on the cash ow 8974 7500 or at
jcheung@menzies.co.uk.
yourself running into trouble. where your business is VAT registered Details of the rm’s franchising service can be
found at
www.menzies.co.uk. ■
April 2009
www.businessfranchise.com
BF088_menzies_Apr09 x.indd 1 26/2/09 12:07:46
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