2.1.4 planning Flashcards
what is a business plan
a document containing a business objectives, aims and strategies and how it plans to achieve them
why is a business plan important
-reduces risk
-helps to attract investors
-banks are more likely to give out loans to business with business plans
-to identify potential problems early on
what is a cash flow forecast
a forecast which shows the inflows and outflows of a business, allowing them to calculate the netflow
what does a cash flow forecast help to do
-show if a business has enough money to pay bills
-show how quickly a business is able to raise finance
what is cash inflow
money going into a business
what is cash outflow
money going out the business
what is net cash flow
inflows-outflows
what is the opening balance
the total amount of money a business has at the start of the month, it is the same amount as the closing balance of the previous month
what is the closing balance
the money a business has at the end of the month, (net cashflow+ opening balance)
what are some limitations of a cash flow forecast
-time consuming (needs to be updated regularly)
-biased (business may overestimate the inflows it earns)
-mistakes are easily made
how can a business plan attract investors
they will be able to look at the plan and see the business is running smoothly and is likely to grow a lot bigger in the future
how can a business plan help to obtain loans
the bank will be able to look at the plan and see they are able to pay it back and trusteable enough to pay it back
what is found within a business plan
-business name
-aims and objectives
-4ps of marketing
-what the business is about
-what products it sells
how is a business plan biased
the business may overestimate their sales too much
