Finance for a New Business: Sources, Forecasts, and Accounts

This report provides a comprehensive overview of finance for a new business, addressing key aspects such as sources of initial and ongoing funding, including savings, loans, and venture capital. It delves into financial advice from various agencies, including trade unions and government websites. The report includes a 12-month cash flow forecast to aid in managing cash requirements, and explores the purpose and preparation of budgets. Finally, it details the creation of final accounts, including profit and loss statements and balance sheets, using information from the accounting systems of a hypothetical business, Quyu cafe. The report concludes by emphasizing the importance of finance in providing resources and managing cash flow, budgeting, and financial reporting for new business ventures.

Finance for a new
business

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
TASK 1 ...........................................................................................................................................1
(a) Sources of initial finance needed when setting up a new business :......................................1
(b) Sources of finance needed when running a new business : ...................................................2
TASK 2............................................................................................................................................2
Sources of financial advice and guidance available for business enterprises : ...........................2
TASK 3............................................................................................................................................2
Cash flow forecast of 12 month to enable a business to manage its cash :..................................2
TASK 4............................................................................................................................................3
(a) Purpose of budgets for a new business : ................................................................................3
(b) Preparation of the Affordable budgets plan for selected business: .......................................4
TASK 5 ...........................................................................................................................................4
Creation of the set of final accounts using information from the accounting systems of own
business :......................................................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Finance is the main field of the business organisation which allocate the assets and
liabilities over the period of time under the risk and uncertainty in the business firm. Finance
refers to art of the fund management and includes the activities like investing, lending, saving,
borrowing and forecasting the financial resources (David and Halbert, 2014). In the project
report, it covers sources of finance for setting new business, guidance regards the fund. It
addition to it includes the cash flow forecast for 12 months and purpose of the budget. In order to
deep understanding the concept of finance a newly business named as Quyu cafe.
MAIN BODY
TASK 1
(a) Sources of initial finance needed when setting up a new business :
There are different sources of finance while setting a new business like savings, capital,
loan, venture capital that needs to established a business as primary manner. Here some of the
sources of fund discussed in brief:
Short term sources:
Savings: This is main the sources of fund that created by an individual out of it personal
income. It does not have any cost to introduced in the new business. For funding the Quyu cafe,
it is primary source to introduced in the firm.
Loan: This can be defined as borrowing the money from outsider of the business. This is
expected to be pay back to lender with interest. It may have additional cost of capital. To
introduce the new resources in the business it is also cost effective sources.
Long term Sources:
Investor: Investor are the shareholder that introduce the money in the particular company'
share and stock to get a benefit of dividend. Business can receive money for the long term
utilisation and pay the return out of its profit (Grammenos, 2013).
Venture capital: It is long term sources of fund that provided by the firm to small
business by considering a potential in the firm and get a higher return. It is type of private equity
to provide the finance.
1

(b) Sources of finance needed when running a new business :
Trade credit: This is essential sources to grow in the running business. This is credit tool
that is provided by the supplier in respect to buy the goods on credit basis. It may enhance the
current sales and maintain the customer loyalty. Quyu cafe can be raise the goods to higher the
sales with trade credit (Owen, Brennan. and Lyon, 2018).
Factoring: It is sources of the fund that is defined as a process in which a business sell its
trade debtors to the third party to get the immediate cash on discounted price. So business can get
cash as per the needs of it.
TASK 2
Sources of financial advice and guidance available for business enterprises :
In the particular section, there are a lot of agencies that provides the advice to the
business organisation. These guidelines can be provided in order to their financial growth and
resolve the particular issue.
Trade union: This is the association the people that provides the legal guidance to the staff
member of the company. These are the agent of the legal representative that resolve the issue
related to affairs of employees.
Government / local Council websites: The local websites guides the business regarding the
promote to the business to reach it out at another level. These council services support the
business entity in provides the business services at particular location.
Some other sources that provides the advise to the business unit such as HMRC and bank.
TASK 3
Cash flow forecast of 12 month to enable a business to manage its cash :
A business can be able to manage the requirement of the cash by developing a plan
regard the forecast a cash flow of the business (Rugman, 2013). Like Quyu cafe can asses the
requirement of the cash in future so it needs to prepare the cash flow forecast. So it can be able to
understand the proper management of the cash items. Herein, Cash flow forecast of the 12
month as Follows:
2

Particular Janu
ary
Febr
uary
Mar
ch
Apr
il
Ma
y
June July August Septe
mber
Octob
er
Nove
mber
Dece
mber
Opening cash
balance
500 600 700 800 900 100
0
1100 1200 1300 1400 1500 1600
Add: Income:
Sales 1500 140
0
130
0
120
0
110
0
200
0
900 1000 1200 1400 1600 1800
Less:
Expenditure:
Fix cost 600 700 700 500 500 700 400 700 600 800 900 1000
Variable cost 800 600 500 600 500 120
0
400 200 500 500 600 700
Closing
balance
600 700 800 900 100
0
110
0
1200 1300 1400 1500 1600 1700
TASK 4
(a) Purpose of budgets for a new business :
The main objectives of the budgeting plan is to provide a basic structured format to the
business in which certain strategies, plan, events and financial model is carried out. It provides a
outlines to the business finance and operational activities to be performed in business. This is the
action plan in which budget help in allocating the fund resources, formulate the business plan
and evaluate the performance. It communicate the plan the based on the future and control the
business activities. In the budgeting process the management head of the particular department
justify the resources to achieve the business goal and objectives. In the relevance to Quyu cafe,
the management of the cafe needs to prepare the budget regarding the future expense and
income. So they can be able to analyse the performance of the business with these budgets
(Shenkar, Luo and Chi, 2014).
3

(b) Preparation of the Affordable budgets plan for selected business:
In order to prepare the budget, there are certain budget that provides the information and
data related to future estimation of the business. For the newly opened business, It is prepared the
budget as sales budget to estimates the sales unit and price of it. Sales budget is all about plan the
expected sales unit with the total value of sales.
Sales budget for the year 2020
Particular January to
march 2020
April to June
2020
July to
September
2020
October to
December
2020
Total
Sales unit 4000 5000 6000 7000 22000
Sales price per
unit
200000 300000 400000 450000 1450000
TASK 5
Creation of the set of final accounts using information from the accounting systems of own
business :
The final accounts of the company Quyu cafe is consider the profit and loss accounts and
balance sheet of the business (Platt, 2013). Profit and loss covers the total expenses and income
of the business whereas balance sheet includes the relevant items like assets, liablities, capital,
drawings with closing stock. Here is the final accounts of the Quyu cafe are as under :
Income statement of the Quyu cafe is as under
Particular Amount
Turnover 620000
Cost of sales 320000
Gross profit 300000
Operating expenses 150000
Operating profit 50000
Tax 30000
4

Net profit 170000
Balance sheet of the Quyu cafe is as under:
Particular Amount
Fix assets
Plant & machine 100000
furniture 50000
Current assets
Cash in bank 10000
Closing stock 20000
Total assets 180000
Current liabilities
Creditors 20000
Long term liabilities -
Loan 80000
Capital and reserve
Share capital 50000
Profit and reserve 30000
Total 180000
CONCLUSION
As per this report it is articulated that finance for the new business play a important role
to provide the resources to the business. Cash flow forecast provides the detail regarding the cash
generation in the future period. The main purpose of the budget to provide the information
5

related to future activities of the business. The final accounts of the company Quyu cafe is
prepared as per the information provided by accounting systems.
6