Detailed Business Plan Report: Financial Projections and Analysis

This report outlines a comprehensive business plan for a technology-driven company providing software, hardware, and IT services. It details the required financial information, including capital investment, direct and indirect costs, and specialist services like liaising services and freelancers. The plan includes sales and production budgets for three years, with projected sales, price inflation, and planned expansion. A 1-year operating expense budget and a detailed cash flow statement are also provided. The report addresses relevant stakeholders, capital-raising methods, funding options for expansion (letter of credit, term loans, SBLC), and factors influencing debt finance. It further discusses cash flow improvement, cash control procedures, accounts receivable processes, managing overdue invoices, and client credit policies, including procedures for monitoring, maintaining, and extending credit. The report concludes with methods for obtaining customer credit information and a sample credit policy.

Report on New business plan
Student Name
Roll No:

1. What type of business are you thinking about creating? What are its main
products/services?
 I am planning to create a company which will be a technology driven. As every
organization/business needs technology to assist their business in terms of:
o Taking strategy decision based on various MIS;
o App, website, hardware, software to centralize the policy and update the database;
o Update with the market and benchmark with the competitors.
So, my company will basically have two wings:
- Solutions: Where the company will sell software, hardware, IT services, Maintenance
& service etc.
- Software: Will develop software based on the requirement;
2. List and briefly describe the types of financial information you may need to create your
business and understand its the financial position.
 For my business set up I will require the below financial information:
o Capital investment for the business;
o Market size/prices of the products/services offered through my business;
o Direct cost related to the services offered;
o Indirect cost related to the services;
o One time investment cost like: Registration cost, feasibility cost,
o Fixed Assets to be purchased;
o Employee payroll analysis, government policies and tax returns;
o Taxes and compliance fees related information
o Lease rent policies, Legal & professional charges to open my business;
o VAT or service rates to be paid to government.
3. Research and describe some “specialist services” that may assist you in operating the
business. (Hint: Describe what advice they can give you and how they help you).
 To open a company is not a mindset of an individual only. It will obviously require
lots of planning and guidelines. For this business, we will require special services in
terms of:
o Liaoning service/ Contract dealers : As our company will serve the solution
business, which will require lots of contacts and agreements. So, we will require
some middle man or service of business Liaoning who will assist us to get the
connects from the market and we will be pay them commission on the basis of
contacts received.
o Freelancers: We will be in service to create software for the clients, so instead of
keeping multiple of employees, we can get service from freelancers who can
assist us to create the software on the basis of demand also to fulfill the demand as
requested by the client on time to time basis.
4. For your chosen business prepare the following and include it in your report:
Sales budget:

Software/Hardware sales
Volume: 800 units
Price: $400 per unit
Expected sales results for 1st
year
800 units x $400 per unit rate = $320,000
Forecast price inflation In year 2: 5 %
In year 3: 5%
= $420
= $441
Planned sales expansion 2nd
year
Planned sales expansion 3rd
year
14% of Yr 1
16% of Yr 2
= 912
units
= 1058
units
Sales budget for year 2
Sales budget for year 3
Forecast price inflation 2nd year x Planned
sales expansion 2nd year
Forecast price inflation 3rd year x Planned
sales expansion 3rd year
= $ 383,040
= $ 466,578

1-year operating expense budget:
Operating Expenses Description $
Rent $ 25000
Telephone Expenses $1500
Electricity Charges $1050
Internet Charges $2500
Salaries & Wages $6000
Fuel & Diesel $1800
Conveyance $1200
Printing & Stationary $500
Commission and Brokerage $1200
Rates & taxes $9000
Total Operating Expenses $49,750
Produce a production budget for your organization
Year 1 Year 2 Year 3 Total
Expected sales ($) $320,000 $ 383,040 $ 466,578 $ 2,631,640

Expected sales (U)
+ Closing stock (U)
- Opening stock (U)
Required production
(U)
800
50
0
850
912
20
50
882
1058
30
20
1068
d. Cash Flow
CASH FLOW Year 1 Year 2 Year 3
OPENING
BALANCE $ 5,000 $ 181,250 $ 412,289
Cash incoming
Sales $ 320,000 $ 383,040 $ 466,578
Other income $ 600 $ 900 $ 720
Total incoming $ 320,600 $ 383,940 $ 467,298
Cash outgoing
Purchases (Stock
etc) $ 32,000 $ 38,304 $ 46,658
Accountant fees $ 5,000 $ 5,100 $ 5,150
Solicitor fees $ 9,000 $ 9,180 $ 9,270
Advertising &
marketing $ 12,000 $ 12,240 $ 12,360
Bank fees &
charges $ 500 $ 510 $ 515
Telephone $ 1,500 $ 1,530 $ 1,545
Electricity $ 1,050 $ 1,071 $ 1,082
Business $ 1,200 $ 1,224 $ 1,236

Insurance
Interest $ 22,000 $ 22,440 $ 22,660
Advertising $ 900 $ 918 $ 927
Commission &
Brokerage $ 1,200 $ 1,224 $ 1,236
Wages & Salaries $ 6,000 $ 6,120 $ 6,180
Rates & taxes $ 9,000 $ 9,180 $ 9,270
Rent $ 25,000 $ 25,500 $ 25,750
Miscellaneous $ 18,000 $ 18,360 $ 18,540
Total outgoing $ 144,350 $ 152,901 $ 162,378
Yearly cash balance $ 176,250 $ 231,039 $ 304,920
CLOSING
BALANCE $ 181,250 $ 412,289 $ 717,209
5. Who are the relevant people in your business that financial reports should be given to?
 Our business can only reach to new heights only if our stakeholders are satisfied
with the business and we are able to work as per our BOD, good corporate
governance, follow all statutory compliance and contribute our things to society.
For this vary purpose, our financial report should be submitted or will be relevant for
various stakeholders like:
- Our wealthy customers;
- Our banks (financial institutions)
- Creditors, who will lend us things on credit;
- Government, to review the tax compliances;
- Shareholders of the company
- Employees of the company
6. Why business raise capital?
 Share Capital is a smallest part of business fund which shows contribution of the
owners to the business. It is also one of the statutory compliance where the
promoters needs to invest or show some funds as contribution when they are
planning to open a company and register with the revenue department. Also, as a
general concern, a company raise capital as to procure the raw material to do
business. The capital amount will boost interest within other stakeholders to invest
into the business. As long as the funds from the shareholders are there the
stakeholders have confidence to put their money into the business.
7. Describe the types of funding available to you for expanding your business and explain
which type of finance is most suited to your business needs?

 With the success of existing business model, stakeholders are willing to invest their
funds into our business. So, for the expansion of the business the type of finance
available with us are:
o Letter of credit: This will help to get the hardware materials on 180 days credit
from banks and can pay after the said period.
o Term Loan: One of the long term facility has also been offered from some of the
bank. So, these will serve the purpose to get the hardware materials from the
vendors.
o SBLC : This type of facility is also available from banks, which gurantees the
vendor to pay within 60 days of material taken.
Among all other option, the cheaper the cost can be opt for the funding facility from
bank.
8. What things may influence the cost of debt finance?
 Few things which influence the cost of debt finance are as follow:
o Amount that is asked to finance;
o Tax rate;
o History of the company
o Background of the promoters;
o Financial performance of the company;
o Projected plan for next 5 years;
o Cash flow of the company;
o Goodwill;
o Debt-equity ratio;
o Current ratios;
o Interest coverage ratio
o Duration of loan
9. List and briefly explain three ways of improving the cash flow.
 The below are the things that will help to increase the cash flow:
o Improve cash conversion cycle: The operating/turnover cycle of the raw material
should be reduced so that inflow from revenue will increase.
o Capex funding from Long term loan: It is a good practice to fund through long
term facilities for capex instead use company own funds.
o Decrease debtors days: Company should focus on cash sales, but as credit sales
overrule the business, so it will be a good practice to reduce the debtors days to
least as possible.
10. Why do we need cash control procedures in the business?
 Cash control procedure is an action plan through we can control embezzlement and
tight the internal control of the company. The other needs are as follows:
o It will build a moral check in the mind of employees;
o It is an statutory requirement where company needs to show the cash controlling
techniques;

o It will help to segregate the duties and accountable for the cash holding with
them;
o It will help to ensure that the assets are accounted for, documented and secured;
o Reconciliation procedure ensure proper documentation and ensure confirmation
from other sources.
11. Why it is important to maintain a good accounts receivable process?
 It is an importance aspect to maintain a good accounts receivable process as it will
help to:
o identify the customer's credit rating ahead we sell the goods;
o build a good customer relations;
o identify the risk, complaints in due time;
o reduce the total debtors outstanding amount in quick period of time;
o prevent any future doubtful debts from the existing debtors;
o Recurring scanning and monitoring customers for credit risks;
12. What will be your procedure for managing overdue invoices?
 To manage overdue invoices my control procedure will be:
o It is always be good, to build a process to get paid in advance from most of
customers;
o If not, then we can build a process where to send a reminder to client, five day
before due date;
o After one day past due, we can send an e-mail reminder to them;
o If it crosses 15 days of due date, then sales manager should call to remind the
payment;
o If not received, after 30 days, it good to send email copies with all other necessary
documents, reminding the payment;
o If the ageing is increasing then should inform an agency to collect the money for
or on behalf of company;
13. Explain how you would monitor and maintain your client credit policy to ensure
payment and minimise overdue accounts. Include any plan for debtors in default to
maximise cash flow
 Usually, it is a business policy to get the KYC done of the new clients before
introduce them into the business. So, for my business too, I will do the below:
o I will ask to fill the required KYC form before we introduce the business;
o Take confirmation from the similar industry about its past performance;
o Ensure that once the new order is asked for the previous payments has been
received;
o Credit risk will be covered on the bank gurantee, so we can ask the customer to
give bank gurantee on the goods taken on credit;
o On normal terms will follow the payment days in past so to avoid future credit
days and have to reduce the debtors days;
14. Should you consider extending credit to your customers? Explain your decision.
 Yes. I will consider extending credit to my customers on the below parameters:

o History of payments are clean and never been deferred;
o No- dues are been pending as on date;
o Growth on existing orders;
o Future viability of business depends on that contract of sale;
o Bank suppose to give gurantee on the increase credibility;
o Payment terms should be clear.
15. Develop and show a suitable client credit policy for your organization
 Credit policy of my organization will be:
o Fill the KYC form;
o Obtain credit rating score from their existing vendors;
o Should be limited to 50% of last order made;
o Before making new order the old debts should be cleared;
o Bank gurantee should be given if the credit is over $10,000
o Legal terms will be mentioned there and should be enforceable;
o Reminders and follow up will be followed in every 2nd day on after due date;
o Interest on delay of payment @15% p.a.
16. Where can you find information about whether a customer can be trusted with
credit?
 Such information can be obtained from:
o Government website where all the companies are registered and can check the
filing status;
o Official website of the company;
o Information from Current vendors;
o Banker and Lenders of the customers;
o Attorney of the company;
o Customers of the company;
o Ratios of the company
o Past trend of the company
o History of the promoters
17. How would you ensure that business has adequate resources for paying taxes in
accordance with legal requirements?
 I will ensure the same via:
o Cash flow before the due date of taxes
o Debt of the company is not higher than the equity;
o Interest cover are in tune so that taxes will be paid on time;
o Credit days are reduced before the tax payment days;
o Allocate an escrow account for tax payments;
18. What taxes should you budget for? Name four different taxes that may be payable
by a business in Australia.
 I will budget for 30% of my net income. The taxes in Australia are:
o Corporate tax to be paid on the net profit;

o Dividend distribution tax, to be paid on distribution on dividend to shareholders;
o Capital gain tax on sale of fixed assets of the company
o Goods and service tax, to be paid on the sale or service provided to any
person/institution.
19. Explain why it is important to record and document financial procedures?
 It is important as it will help to:
o Monitor and graph the progress of my business;
o It will help me to prepare financial report at the end of the period;
o It will help to identify the key product to sell;
o Keep track of deductible expenses and additional expenses;
o Prepare my tax returns to be filled at the year end.
o Keep records of my fixed assets;
o It is an compliance required by the government
20. Name five common financial procedures in your business and explain how you
would communicate these procedures to the relevant people to help the implementation
of the business plan.
 Some of the common financial procedures in my business will be:
o Reconciliation with bank statement: I will communicate my finance team to
update their bank pass book with cash book so to avoid last minutes reconciliation
and to get the actual receipt of funds and it will help to avoid bad debt funds.
o Cash control: Cash should be kept with cashier only and should be used for petty
cash only.
o Fixed assets register: I will allocate a team to maintain the fixed assets register
which will ensure the sale or purchase of register.
o Stock register: I will ask stockiest to take the count of stock of goods on relevant
period of time so to avoid stock out time and to be updated with actual stock.
o Updates on Ledgers: I will ask account clerk to update all the ledgers on time so
that we can prepare the accounts on time at the end of each period.
21. Explain how would the following situations impact on your financial plan?
a. Your marketing strategy includes launching a new product in the 2nd half of the
financial year.
 To launch a new product in the market in between the year will severely make
change in financial plan:
o To make expense in terms of advertisement so to allocate funds for it will effect
the cash flow
o to allocate budget for the new product raw material will effect the budget for
existing procurement;
o the demand of existing product may effect if new product is launched and centre
of attracting gets diverted;
o Fixed assets procurement may also effect the cash flow of the business;

b. Your operational strategy includes an expansion of your operations to another
state at the start of the year.
 It will impact the financial plan as:
o To obtain the registration will bear some cost,
o have to invest in feasibility study in that state, so cash flow have to be allocated;
o set a new management, rent a new office and to develop a new market will make
a huge investment at initial time of the year, so budget for existing product cannot
be governed;
22. What kind of key performance indicators should be used to monitor financial
performance?
 Current ratio should be above 1;
 Debt equity ratio should be in the form of 2:1
 Key management person of the company should not be changed;
 Corporate governance should be expedite;
 Substantial growth in revenue of the company;
 Cash conversion cycle should be less than 7 days;
 Debtors days should be reduced to 7 days;
 Annual returns should be filled on time;
 No delay in repayment of statutory compliance
23. Explain the importance of calculating and evaluating ratios in your business?
 For my company it is really important to evaluate the ratios as it will help to
identify the following:
o business liquidity
o Ability to repay the short term loans
o insight the movement of funds
o Turnover time of the funds;
o Recovery time of funds so invested;
o Anywhere freeze money i.e. bad debt recovery
o Turnover/value of the assets or assets importance to generate the funds
o Overdue recovery of funds;
o Capital requirement in the company
24. What are budgets used for in the business?
 The budgets are used for:
 It helps to control income and expenditure of the company
 It helps to establish priorities and set targets in numerical terms
 Assigning responsibilities to budget holders and allocate resources
 Motivate staffs
 It helps to improve efficiency of the man force and assets
 Communicate targets from management to employees
 It also provide direction and co-ordination, so that business
objectives can be turned into practical reality

25. Explain the relationship between budgets/projections and the actual figures in a
business?
 The relationship is just to show the reality vs. assumptions. The budget figures are
shown or given in the business on the basis of past year performance or past year
data on which the company needs to plan the future where as the actual figures
may be higher or on lower side of the budgeted figures. It can be identified as
adverse or favourable if it is lower or higher side of the budget figures. It is good
if it is higher in terms of sales but adverse if it is higher in terms of expenses.
26. When assessing financial plans, why should we look for the variance when
comparing budgets/projections and actual numbers?
 We look for the variance so to identify the gaps and loops into the business. If the
variance are in terms of "favourable" then needs to set the budget accurately so
that we can reach nearer to the fact figures or we have over performed. But if the
variance is "adverse" then have to identify the gaps where the things went wrong,
so that in future the things will not be repeated.
27. Explain why do we consider variances in budgetary control?
 We consider the variance in budgetary control so to identify:
o Static budget should be prepared accordingly
o Flexible budgets should be there if the variance are over stated
o Performance report should be given to the management for the review of
strategic decisions
o