2.1.4 Planning

Question 1

What is a business plan?

Answer 1

A business plan is a document which sets out the future plans for a business.

Question 2

Why does a business write a business plan?

Answer 2

• Attract potential investors
• To give the owners some direction
• To set targets
• Identify potential problems early
• Monitor the effectiveness of the business

Question 3

What is included on a business plan?

Answer 3

• A cash flow forecast, which will show expected income and expenditure over the upcoming year.
• Name of the business, Product or service and the market it’s aimed at, Human Resources, production costs and potential suppliers, how it will be financed, financial information.

Question 4

What is the purpose of a business plan?

Answer 4

1. To help set up a new business
2. To help the business raise finance
3. To help the business to set objectives
4. To outline how functions of the business will be organised

Question 5

What is a cash flow forecast?

Answer 5

A cash flow forecast is the day-to-day running of a business budget.

Question 6

What is cash inflow?

Answer 6

Income

Question 7

What is cash outflow?

Answer 7

The cash that is spent in the business

Question 8

What are the uses of cash flow forecasts?

Answer 8

• To help control and monitor cash in and out of a business.
• A good cash flow forecast may help the owner to secure a better deal on their finance.

Question 9

What are the limitations of a cash flow forecast?

Answer 9

• Only a 12 month snapshot, not useful for decisions.
• It could be very risky for an investor to make decisions about the business on just the cash flow forecast alone.
• The owner may have overstated expenditure or understated income