2.1.4. Planning

Question 1

Relevance of business plan to obtain finance

Answer 1

-Plan is useful in attracting finance and:
-Helps ensure entrepreneur has carefully considered potential problems
-Has reference point to maintain clear sense of direction
-Had some quantitative targets to aim for

Question 2

Main section of business plan should include:

Answer 2

-Executive summary
-Product/Summary
-The market
-Marketing plan
-Operational plan
-Financial plan
-Conclusion

Question 3

Net cash flow

Answer 3

Inflow-outflow
Indicates how well each month expected to go for the business.
-ve value allows you to spot problems in advance and plan ahead

Question 4

Use of cash flow forecasts

Answer 4

To spit cash problems in advance and take action to prevent major crisis. Things to improve cash flow include:
-Producing and distributing products as quickly by reducing time between paying for materials and receiving cash for finished goods
-Chasing customers to pay quickly through incentivising cash payments with discount or more careful credit control etc
-Minimising spending on equipment via leasing or renting or even postponing investments
-Keep stocks to a minimum as stock represents cash spent by not year converted back into cash flow
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Question 5

Limitation

Answer 5

-Only an estimation
-Being too optimistic means there’s danger that cash inflows are forecasted too high or to arrive too predictably
-Relying too much on the forecast gives false sense of security

Question 6

Closing balance

Answer 6

Closing balance=Opening balance+Net Cash Flow