Managing and Running a Small Business: Financial Management, Cash Flow Forecasting, and Break-Even Analysis

This report discusses financial management for small businesses, including cash flow forecasting and break-even analysis. It covers key legislation and regulations that impact small businesses and provides an overview of interpreting financial statements and applying quantitative techniques. The report includes an annual itemized monthly cash flow forecast and a critical discussion of how key financial statements contribute to successful business management.

Unit 29 Managing
and Running a Small
Business

EXECUTIVE SUMMARY
Today's business environment is becoming very dynamic in nature and that's why it is
necessary for each kind of organisation to have a good financial management system. So this
report will be discussed an overview of the strong financial management of a company with
cash flow forecasting and break-even analysis. In order to run the business successfully in the
market, it is important for the company to consider that it needs to follow all the key
legislation and legal requirements.

Table of Contents
EXECUTIVE SUMMARY........................................................................................................2
Activity 2....................................................................................................................................4
INTRODUCTION......................................................................................................................4
MAIN BODY.............................................................................................................................4
Produce an annual itemised monthly cash flow forecast that shows fixed and variable cost
against income........................................................................................................................4
Explain how break even analysis could be applied to an organisational situations...............5
Interpret key financial statements for an organisation in relation to how the contribute to
the successful management of organisation...........................................................................6
Apply appropriate quantitative and analytical techniques in order to provide an appropriate
detailed cash flow forecast and break even analysis..............................................................6
Critical discussion of how key financial statements contribute to the successful business
management...........................................................................................................................7
Discuss key legislation and regulations that have implications on the small business..........7
Evaluate the implications of key legislation and regulations in organisation context...........8
Critically evaluate key legislation and regulations that affect a small businesses.................8
CONCLUSION..........................................................................................................................8
REFERENCES.........................................................................................................................10
Books and Journals:.............................................................................................................10

Activity 2
INTRODUCTION
Finance is the backbone of any organisation and it becomes more important for a
small social organisation or a start-up. The reason behind this is they are known in the market
and that's why it becomes necessary for them to make an accurate statement of financial
transactions and also need to manage their financial position effectively (Jurakulovna, 2021).
It is necessary for the upcoming entrepreneur that they should have a sound understanding of
financial management for small businesses or social enterprises. For that purpose, this report
will produce an accurate cash flow forecast and a break-even analysis which helps to analyse
the contribution of financial statements in the successful management of the business. This
report will also include the application of quantitative and analytical techniques so that
company will be able to provide an appropriately detailed cash flow forecast. In addition, this
report will produce an annual itemized monthly cash flow forecast. In addition to this, it will
cover the discussion related to the key legislation and regulations which provided an impact
on social enterprises and on small businesses.
MAIN BODY
Produce an annual itemised monthly cash flow forecast that shows fixed and variable cost
against income
For a small business or social enterprise, it is necessary to understand that a cash flow
forecast is very helpful for growing because an organisation is able to predict the break-even
point. It is also found that organisations will be able to start re-investing when they know
about enough surplus cash available in the business which ultimately helps to grow. It is very
well known by the organisation that social enterprises are generally small in size and they do
have not enough money to expand the business (Nurhayati and et.al., 2020). That's why it
becomes more important for a company to critically analyse all the requirements of cash in
the company. Cash is very limited in small size or social enterprises and that's why they are
forecasting ait very important so that companies able to know the area in which they have a
potential to invest. This can be possible with the help of producing a cash flow forecast on a
monthly basis that shows fixture as well as variable cost against income. It will facilitate the
detailed knowledge about the cash flows related transactions.

Jan Feb Mar Apr May Jun Total
Cash inflows
Investment 10000 10000
Credit sales 2500 10000 10000 10000 10000 10000 52500
Total inflows 12500 10000 10000 10000 10000 10000 62500
Cash Outflows
Project materials 3000 3000 3000 3000 3000 15000
Sub contract labours 4000 4000 4000 4000 4000 4000 24000
Marketing 500 500 500 500 500 500 3000
Legal and
accounting
1250 0 0 0 0 0 1250
Equipment 2500 0 0 2500 0 0 5000
Salary 1000 1000 1000 1000 1000 1000 6000
Other costs 500 500 500 500 500 500 3000
Total Outflows 9750 9000 9000 11500 9000 9000 57250
Net cash flow 2750 1000 1000 -1500 1000 1000 5250
Opening balance 0 2750 3750 4750 3250 4250
Closing balance 2750 3750 4750 3250 4250 5250
Explain how break even analysis could be applied to an organisational situations
Break even analysis is found to be an important tool of financial management that
helps to determine the stage of company product or service will be profitable or not. It is
actually concerned with financial calculation that used for the purpose of determining the
number of products that should be sell by the company to cover its expenses (Palepu and
et.al., 2020). Break even analysis have important elements that include fixed cost, variable
cost and average price. Fixed cost is never get change as it stay the same. Variable cost is
continuously changing according to the business sales. The last average price can be fined by
the average amount that will charge by Company products and services. In order to calculate

the breakeven point, the fixed cost should be divided by the difference of average price and
variable cost. The company is able to determine the break-even point. It is important to
understand that break even analysis is very helpful to inform the minimum performance of
business. It also provide the information to the business that which point they will be able to
generate profits. This will helps in setting the production goals accordingly.
Interpret key financial statements for an organisation in relation to how the contribute to the
successful management of organisation
It becomes important to understand that keeping financial statements is very
important as they contribute to the successful management of the organisation. There are
three important reasons behind this that include financial statement provides information
about the results of operation, cash flows and financial position of an organisation. A
financial statement is playing a very important role in the organization because it reveals the
ability of the company to generate revenue. In order to run a business successfully, it
becomes necessary for an organisation to interpret each and every key financial statement so
that company will be able to successfully manage the organisation (Matar and Eneizan,
2018). For example, the cash flow statement is found to be an important key financial
statement of the organisation. If a company is interpreting a cash flow statement in an
effective way then they are able to know how much they have an inflow or outflow of cash
which helps to take the day-to-day decisions. This is the reason that keeping financial
statements are playing an important role.
Apply appropriate quantitative and analytical techniques in order to provide an appropriate
detailed cash flow forecast and break even analysis
It is analysed that organisation needs to focus on the achievement of goals and
objectives. But it can be only possible when they have good financial strength. It can be
possible only with the help of producing effective cash flow statements and break-even
analysis. It is necessary to use appropriate quantitative and analytical techniques so that
company will be able to provide an appropriately detailed cash flow forecast and break-even
analysis. This can be possible by preparing a cash flow statement which has three important
headings that include cash flow from operating activities, investing activities and cash flow
from financing activity. In order to create this type of financial statement, the company is
able to determine the ending balance of cash flow. On the other hand, the break-even analysis
should be found with the help of the formula.

Critical discussion of how key financial statements contribute to the successful business
management
As it is already that accurate cash flow forecast and break-even analysis are necessary
for the successful management of the business. Both key financial statements and necessary
because they will help in the achievement of goals and objectives (Jalbert, 2020). It provides
detailed information on the financial position of the company. It is important to understand
that a cash flow statement is providing information about the actual flow of cash and the
company which is necessary for taking day-to-day decisions and the company will be able to
analyse its liquidity strength. On the other hand, break-even analysis is also important to
produce because it provides detailed information that which point is necessary for a company
where they have no loss and no profit. It also provides information that when the company
will be starting to earn profit. This type of information is important for the successful
management of the business. All decisions are taken by the company only when they have
information on cash flow statements and break-even analysis.
Discuss key legislation and regulations that have implications on the small business
Small businesses are very important for each and every country and that's why
countries make some compliances so that they will be able to run their business ethically and
legally. In order to run the business successfully, a company should follow all the legislation.
It should comply with all the applicable industrial regulations that set my profile regulator
which include the law society or the environment agency, financial conduct authority, etc.
Some important laws related to employment law, health and safety, contract and agreement,
etc. should be complied with by the organisations (Zenuni, 2021). In addition to this, they
also need to comply the regulations such as the equality act 2010, GDPR which is the
acronym for general data protection regulation, etc. This type of key legislation and
regulations provide of direct or indirect impact on a small business. It found that the company
needs to work according to this legislation and regulations. Then the company will be able to
run its business and the market successfully.
Equality act 2010 is focusing on providing equality and diversity in the environment
so that each and every person in the business is able to take the equal opportunity and also get
fair disciplinary hearings. This can be possible with the help of following the Employment
Right Act of 1996. Every person has some personal data in the records of the company and
that's why it is important for a small business to make sure about the confidentiality of that

information. For that purpose, the general data protection regulations place a number of
requirements so that companies will manage and process personal data.
Evaluate the implications of key legislation and regulations in organisation context
It is analysed from the discussion of the legislation and regulations related to the
organisation that the company needs to comply with all legal requirements because it
provides an implication for the organisation (Petrošiene, Urkiene and Šidlauskiene, 2019). It
is analysed that company needs to follow all the laws such as the equality act, employment
right act, health and safety act, etc. in order to run the business successfully. Is also analysed
that these regulations are providing an implication for the decision-making of the company.
This can be understood with the help of an example. For example, the company needs to take
a decision for providing a bonus in the organisation. For that purpose, the company needs to
comply with the equality act and employment right act only they will be able to take the right
decision which is fair for the company.
Critically evaluate key legislation and regulations that affect a small businesses
As is already discussed the company needs to make sure about all the legislation and
regulations because it is necessary but the successful management of the company. It is
analysed that the legislations and regulations not only provide the effect on decision making
of the company but also affect the behaviour of employees in the organisation (YUNIAWAN,
2019). When the company is strict in their legislations, then it is provided with a definite
positive impact on the employees because employees are working according to the legislation
and regulations as they know the business decision. That means a company will be able to
modify the behaviour of customers and that's why it is necessary to comply with all the
legislation and regulations.
CONCLUSION
It can be concluded from the above discussion that financial management is an
important factor that should be present in the individual who wants to become an upcoming
entrepreneur. It is necessary to understand every day the complexity of the organisation
increases and it also increases the financial-related problems. This is the reason that company
needs to focus on focusing accurate cash flow in order to contribute to successful financial
management. This report includes the fictitious figures of a cash flow for caste which helps to
contribute to the successful management of financial statements in the organisation. It also
covered key legislations that have any implications on small businesses.

REFERENCES
Books and Journals:
Jurakulovna, J.G., 2021. The Necessity and Theoretical Basis of Financial Statement
Analysis in Modern Management. Academic Journal of Digital Economics and
Stability, 7, pp.89-95.
Palepu, K.G., and et.al., 2020. Business analysis and valuation: Using financial statements.
Cengage AU.
Matar, A. and Eneizan, B.M., 2018. Determinants of financial performance in the industrial
firms: Evidence from Jordan. Asian Journal of Agricultural Extension, Economics &
Sociology, 22(1), pp.1-10.
Jalbert, T., 2020. Un Modelo Para Pronosticar Estados Financieros De Pequeñas Empresas Y
Desempeño De Las Empresas (a Model for Forecasting Small Business Financial
Statements and Firm Performance). Revista Global de Negocios, 8(2), pp.59-83.
Zenuni, B.R., 2021. Financial and Fiscal Reporting, the Effect on the Financial Statements:
The Case of Vlora.
Petrošiene, B., Urkiene, J. and Šidlauskiene, D., 2019. Financial statements formation in the
context of the management paradigm. Гуманітарний вісник Запорізької
державної інженерної академії, (76), pp.210-220.
YUNIAWAN, A., 2019. Turnitin: Micro, Small and Medium Enterprises’ Understanding in
Preparing Financial Statements Based on SAK ETAP.
Nurhayati, N., and et.al., 2020, March. Training of Making Financial Statements Using
Microsoft Excel to Bankable Financial Statement at Small and Medium Enterprises
in Bandung City. In 2nd Social and Humaniora Research Symposium (SoRes
2019) (pp. 251-252). Atlantis Press.