The cashflow forecast for my business shows that I expect to earn 27753 in a year. However this can be wrong because the sales and payments figures are all estimations, which could affect my figures by either increasing or decreasing the figures. As my sales figures are all predictions, it can affect my other figures e. g. net cash flow. If you look at June and July it shows that Mcbains will have not enough money coming in to cover my expenses going out, which is why I have a negative forecast between those months.
Incorrect cashflow forecasting may have insufficient liquid assets for the day to day operation of Mcbains. Of this is the problem then I will find it hard to pay to my suppliers. To prevent any more loss of money during those months, I can make our promotion strategies stronger e. g. do more posters and leaflets so that the sales will increase to cover my expenses in that period. I can also do special promotion that will attract people to Mcbains e. g. free special toys for children or coupons to get the sandwiches cheap.
Another way to prevent loss is to reduce my stock during those months, which will save me money. The reason why I have a negative cashflow during the summer period is because more people go abroad for holidays, which can also be seen from the sales figures. The sales figures clearly show that in the summer period (June - July); I will decrease sales; however this again is only a prediction of figures. Mcbains sales and earnings will increase in the winter - spring period because there are more people in the area were I am located at.
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This is due for a number of reasons e. g. celebrations (Christmas), sales (January sale) and less people going on holidays. My expenses for my electricity will decrease in the summer period (June - August) because there will be less use of electricity compared in the winter period (Sept - Dec). I also am not getting a loan from the bank because I have enough starting capital to start Mcbains at 15000. During the end of the year for Mcbains, I will be able to make comparisons between the predicted figures in the cashflow forecast and those which actually occurred.
This will help me then find out were there was problems which have occurred. This will again help me to identify possible reasons for any differences between the two sets of figures e. g. overpayment was made. This shows that if I keep monitoring the cashflow will allow efficient cashflow in Mcbains. Also notifying my competitor's cashflow will give me the advantage for me because I can then improve what they are bad at. If you look at my alternative ratios of my competitors (look at my evaluating my business plan section), it shows that I need to do a lot of work before I get to their stage.
The planning process is very important because it clarifies the aims and improves the performance for Mcbains. Producing a cashflow forecast is a key part of the planning process because it is a document concerned with the future of Mcbains. Profit and Loss Account Mcbains will earn 85358 in our starting year. This was calculated by adding each month's sales revenue. The account also helps the balance sheet to determine if both sheet and account will balance. The gross profit shows what I have taken out from my stock.
It also shows that the closing stock might not be accurate because the stock figures from the cash flow are an estimate. The way that I got my purchase figure from the stock from the cashflow forecast, however the first month of the stock is the opening stock figure (Jan - 900), so you then add the rest of the stock figures which adds to 9900. The profit and loss account helps Mcbains to see how much profit I have made in the end of the year. This also helps me because I can use the other figures from previous year to see if I am making a profit or loss in profit.
This will help me to improve Mcbains weak points. If you look at my break even chart, it shows that I will not break even in the first two years, which shows that I will not make a profit during that period. The account can be used to see how well I have controlled the overheads e. g. if the gross profit is larger than the net profit, this will show that Mcbains overheads is high. I can use the account to measure the growth of Mcbains. I can use previous years account figures to see if Mcbains is growing and determine where I can make more improvements to the business.
The disadvantage of the profit and loss account is that I can not use it to see what will happen in the future, however it shows what has happened in the past. But the cashflow forecast and budgets can help me to predict the future of Mcbains performance. Again the account can help me by showing possible trends in the future by looking at the accounts in the long term (5 years) e. g. figures might get high for Mcbains because as more people demand for healthier food.
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