Aroma Cafe Business Plan: Financing, Accounting, and Legal Aspects

This report provides a comprehensive business plan for Aroma Cafe, an international coffeehouse franchise. It begins with an overview of the business, including its products and services, and discusses the legal structure of the cafe as a limited liability company. The report then details various financing options, including short-term sources like trade credit and accrued wages, and long-term resources such as loans and equity finance. The crucial role of accounting in measuring business transactions, decision-making, and compliance with regulations is highlighted, along with the application of accounting principles and standards. The report also outlines the property, plant, and equipment required, depreciation methods, and additional details like unearned revenue and prepaid expenses. Finally, it specifies the information required by banks for granting business loans, such as budget details, capital contributions, financial statements, and ratio analysis. The report concludes with a list of cited references, providing a solid foundation for the business plan.

Accounting for Managers

TABLE OF CONTENTS
Introduction................................................................................................................................3
Overview of Business................................................................................................................3
Legal Aspects.............................................................................................................................3
Financing Options......................................................................................................................4
Short Term Finance sources...................................................................................................4
Long term resources...............................................................................................................5
Role of Accounting....................................................................................................................5
Details relating to applied Property, Plant and Equipment........................................................6
Additional Details......................................................................................................................6
Other Information required by bank for granting business loan................................................7
References..................................................................................................................................8

INTRODUCTION
The present report specifies the business plan of the cafe; which is a franchise of an
international coffeehouse chain Aroma Cafe. A business plan can be said as documented set
of business goals, financial forecast and other defined objectives which have been aimed to
attain over a specified time (Farrell, (2016). All the details relating to cafe such as legal
aspects; available financing options, the importance of accounting, needed plant and
machinery and other factors have been described in detail. An effort is made to include all the
details and factors which play a pivotal role while forming a business.
OVERVIEW OF BUSINESS
Aroma Cafe is an international coffee house which provides and deals services and
products like coffee, tea and pastries. Presently it has 13 cafes in Buenos Aires; now the same
will be opened in Eltham. As no other same cafe exists in this area, the advantage of same
will be taken as goodwill of the brand already exist in the market. Thus, no extraordinary
promotion expenses will be required. The same products will be provided with additional
choices and flavours so that more customers can be attracted. Retail services will be provided
to the customers, and wholesale service of the product will be available for party orders and
other festive. The products will be manufactured at the cafe only, and efficient efforts would
be made to provide fresh products to the customers.
LEGAL ASPECTS
The cafe will be a limited liability company. The legal form of an organisation is an
important decision as the structure relating to resources and assets is according to that only
(Steingold, (2015). Each form evolves a separate approach for dealing with profits and losses.
The corporation is having a unique feature that their profits are not directly absorbed by the
owners instead they affect the shareholders indirectly and reflect profit and loss through the
price of shares. The reason behind choosing limited liability as the legal structure is accessing
the advantage of both corporation and partnership form of business. According to Demski,
(2013), in the case of LLC profit and losses can be transferred to owners without taxation of
the business itself and at the same time, they are shielded from personal liability. Another
benefit which is available by having LLC as a legal form of business is that no one can seize
personal assets in case of any judgement of law proceeded against your business. It can be

said that it a rock-solid protection for personal assets that can be attained in business (Farrell,
(2016). Thus procuring all these advantages is the main reason behind selecting LLC as a
legal form of the cafe.
FINANCING OPTIONS
It is a small venture, but as the same is established on a large scale, it will require adequate
funds for running it successfully. The specified sources are available for financing:
Figure 1: Sources of Financing
Short Term Finance sources
 Trade credit: It is the most common resource used for financing. The basic necessity
of maintaining the same appropriately is normal accounting practices and nothing
more (Steingold, (2015). The cafe can access same from the dealers with whom it
works on daily basis. Even before signing the contract the terms relating to credit
available can be discussed previously so that no dispute arises later. The option is
availed after average creditors’ value (anticipated figures) available each year and
then average settlement period can be computed for four years.
 Accrued wages and taxes: Accrued wages and pay-as-you-go (withholding
instalments) are some of the examples which are used as spontaneous sources of
Short term
Resources
Trade Credit
Accrued wages and Taxes
Factoring
Bank Overdraft
Long term
Resources
Loan from financial institutions
Equity financing

finance (Steingold, (2015). A part of the salary of employees can be retained as
security, and the same is paid back when they leave the job or a particular period.
 Bank overdraft: This facility is generally attached to cheque account and loan is
withdrawn only in the case when a cheque written on the account exceeds the positive
balances.
 Factoring: It provides right to the lender for collecting the cash owning on invoices at
a discount from the agency. Further, the same agency collects the money back from
entity’s customer (Radu, (2013).
Long term resources
 Loan from financial institutions: The cafe can look for financial institutions as
intermediate finance and can access loans such as a fixed rate business loan, interest
only loan, instalment loan, lease finance and other options as per its required
accordance.
 Equity Finance: This option can also be applied by the cafe for the purpose of
collecting funds (Hertz., Beasley & White, 2015). It is because; this method is usually
used when owners wish to expand their business or sell ownership rights to other
investors. The same is performed through selling ordinary shares or preference shares.
Ordinary shares have no maturity date and payment attached to same like dividends
are decided by directors out of profit. Preference shares are a hybrid form of capital
and generally have fixed rate of return in the form of dividends (Peirson, Brown,
Easton & Howard, (2014).
ROLE OF ACCOUNTING
Accounting can be said as a process of ascertaining, evaluating and communication
the economic information relating to the organisation. As per the study of Govendir & Wells
(2014), the same is applied to the management for the purpose of making a variety of
decisions. Business transaction can be effectively measured with the accounting and assist in
taking an efficient decision (Govendir & Wells, 2014). In the present case, the cafe will
require knowing details needed by both external and internal users of the organisation. The
same objective will be accomplished with the assistance of effective accounting as all
necessary information required by entity’s owner as well as management and by
shareholders, employees government authorities. Accounting plays a vital role while taking

financial as well as a managerial decision, as the economic information required for such
decision reflects through financial statements (Farrell, 2016).
In present case accounting information will assist management as well as employees
in ascertaining main analysis like the products which are not profitable; whether defined
goals and objectives have been achieved or not; evaluating the areas which required to
strengthen and assessing many other factors. As per the views of Demski (2013), the
relationship between sales volume, cost, prices and profit is assessed by accounting
information, and changes are made accordingly for achieving the defined goal. The
provisions which will require to be followed by the cafe comprise Corporations Act 2001;
accounting principles, ethics, standard and IFRS (as the cafe relates to an international
brand). Application of specified rules and provisions assures that adequate disclosures have
been provided appropriately to users like shareholders through financial statements (Collier,
2015).
DETAILS RELATING TO APPLIED PROPERTY, PLANT AND
EQUIPMENT
The main equipment which will be required in the cafe is Espresso and Coffee
Equipment s the customers have a main demand of coffee in Australia. As cakes and pastries
will be cooked in the cafe only so microwave oven would be required for the same.
Comfortable Furniture would be required so that people feel relaxed and comfortable in
spending out their time in the cafe. According to Bodie, (2013) the straight-line depreciation
will be applied on this machinery as these have a long term life .Application of SLM method
of depreciation no higher depreciation will be charge in initiating years. Thus it will also
support in presenting profit appropriately (Liapis & Kantianis, 2015) .
ADDITIONAL DETAILS
Unearned revenue is the advance received on goods and services and the same is
presented in liability side (Bodie, 2013). Advance relating to party order might be available at
the liability side of the financial statement as this income cannot be recognised until the order
is fulfilled. The prepaid expense will be paid to the dealers for providing the supplies or
payment to employees in case they required.

OTHER INFORMATION REQUIRED BY BANK FOR
GRANTING BUSINESS LOAN
The other details which will be required by the bank for the purpose of granting
business loan are details regarding the budget. As through them, bank will know details about
the financial framework and strategic planning of the cafe. The various kinds of budgets can
be demanded such as sales, purchase, cash and capital budgets. The details relating to capital
contribution will be required by the financial institution. The forecasted profit and loss and
balance sheet (financial statements) and ratio analysis of upcoming years might be asked by
the banks for the purpose of assessing the ability of organisation in earning profits
(Bhowmik, & Saha, 2013). Trend analysis could be asked by the banks for assessing the
future direction of various items. Revenue and expenses are expressed in percentage in trend
analysis. Thus the same is also referred as common size statements. According to Annand &
Dauderis (2014), the details of accounting policies followed by the company will have to be
provided in detail so that bank can gain information relating to policies applied behind the
formation of financial statements. Ratio analysis might also be asked for interpreting the
results of financial statements. It assesses in evaluating profit relative to resources available
for generating the profit through calculating profitability ratios. Thus all the above-specified
details will assist the bank in taking a decision in an appropriate manner relating to granting
the loan.

REFERENCES
Books and Journal
Annand, D., & Dauderis, H. (2014). Introduction to Financial Accounting.
Bhowmik, S. K., & Saha, D. (2013). Sources of Finance. In Financial Inclusion of the
Marginalised (pp. 61-71). Springer .
Bodie, Z. (2013). Investments. McGraw-Hill.
Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Demski, J. (2013). Managerial uses of accounting information. Springer Science & Business
Media.
Farrell, B. (2016). Depreciation and the Time Value of Money. arXiv preprint
arXiv:1605.00080.
Govendir, B., & Wells, P. (2014). The influence of the accruals generating process on
earnings persistence. Australian Journal of Management, 39(4), Pp 593-614.
Hertz, G. T., Beasley, F., & White, R. J. (2015). Selecting a Legal Structure: Revisiting the
strategic issues and views of small and micro business owners. Journal of Small
Business Strategy. 20(1).Pp 81-102.
Liapis, K. J., & Kantianis, D. D. (2015). Depreciation methods and life-cycle costing (LCC)
methodology. Procedia Economics and Finance, 19. Pp314-324.
Peirson, G., Brown, R., Easton, S., & Howard, P. (2014). Business finance. McGraw-Hill
Education Australia.
Radu, M. (2013). The Impact of Depreciation on costs. Annals of the University of Petroşani,
Economics, 13(1). Pp 251-260.
Steingold, F. S. (2015). Legal guide for starting & running a small business. Nolo.