Unit 3 Assignment 3: Financial Planning and Implementation

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    In this assignment, I will be describing the purpose of budgets, especially for new businesses. I will also prepare budgets for my own business plan and I’ll analyse the impact changes in costs and selling prices may have on my business.

    Budgets allow businesses to create a spending plan that will ensure there is enough money for the expenses they may incur or for a range of other reasons including to achieve business objectives or to cover the cost of essential business practices such as advertising or research and development. Businesses and organisations in every sector sets budgets and those who don’t tend to find themselves in a very sticky financial mess, especially those who are in debt and we shall discuss budgets and debt management next.

    Budgets also help businesses, especially new businesses, monitor spending and prevent themselves from falling into debt; budgets, if kept in line with, can allow organisations to prevent themselves falling into debt and even helping them to get out of debt.

    If an organisation is running in deficit, meaning they’re spending more than they have incoming, they can lower budgets where practical to spend less but still receive a similar amount of income over time therefore lowering their deficit, if an organisation is in debt, over time they will climb out of debt and with their cash balance growing once they’ve overcome whatever debt they have, they can invest this in increasing performance so they can normalise their budgets so departments are able to function as efficiently as they did before.

    Efficiency is key in business and budgets can have a major effect on efficiency and productively, the rule of thumb is that decreasing budgets will lower both efficiency and productivity unless in cases where budgets are set too high in the first place (which is often an issue start-ups experience). However, lowering budgets can increase productivity and efficiency by forcing workers to work within their limited means, this is at the cost of workplace ethics and overall mood of the workforce but as the saying goes “A happy workforce is a productive workforce”, you can expect productivity and efficiency to be short lived if budgets are lowered, evidence of this can be seen in the rise of crime due to government austerity measures and cuts to local police force budgets, police forces whose budgets were cut experienced rises in crime in their local areas. The same can be seen in the National Health Service, Government budget cuts have meant accident and emergency departments are being stretched to breaking point, from an economic standpoint, the NHS simply is no longer viable financially as it currently stands. Furthermore, as the NHS demonstrates with budget cuts in other departments, their access to private treatment is less, this impacts lower income service users who cannot afford their own treatment. Unless those who can afford to pay for their own health care start paying for their own care, those service users of the NHS who cannot afford to pay for their own healthcare will be negatively impacted by these cuts. My point is, when efficiency is lowered (and this can be an impact of lowering budgets), it isn’t just employees who are effected.

    If Starbucks lowered the budgets they have for sourcing their product, the quality of the newly, cheaper sourced coffee beans, for example, may be of inferior quality, this will directly impact their customers who may reject their loyalty to the brand and go elsewhere.

    Another thing budgets influence may be the price customers pay for the products they are buying, this is especially true when budgets are increased but not always, depending on how budgets are used. It is true in the case of increasing budgets that go toward the cost of manufacturing an individual product (as opposed to manufacturing a completely new product), if Lush, the handmade soap and personal care company, increased their budgets in making a specific bar of soap, they may decide to use more expensive, better quality ingredients, this will influence the price the customer pays for that bar of soap.

Budgets may be changed to allow for economic factors such as inflation, in these cases, product prices may increase whilst budgets remain the same or possibly decrease in the case of disinflation or deflation (where the distinction between the two is disinflation is a natural economic occurrence and deflation is a result of government fiscal policies), their borrowing, interest (though this is set by the Bank of England MPC which is a group of nine members including the bank’s chief governor, two deputy governors and the chief economist but they are all appointed by the chancellor who reports directly to the prime minister) and taxation.

Organisations can set budgets for virtually anything, local authorities set budgets for dealing with local socio-political issues such as homelessness and local unemployment, as well as city planning and maintenance, social care and other services such as bulk waste collection and maintaining and funding partnerships such as Leicester’s Drug and Alcohol Partnership (now called Turning Point). Businesses may set budgets for marketing, advertising, product development and training for their staff, it goes without saying budgets, when used correctly, can massively benefit a business but at the same time, they can have a negative effect if overused or used incorrectly or planned poorly.

To use myself as an example, a nice, happy childhood where I never had to once think about how much life costs to live, a major family event, a parent who turned to alcohol abuse and became irrationally, at sixteen years old, within the space of a week I went from happy childhood with no cares in the world to living in a tent in a closed off to the public section of Castle Park in Leicester eating sausages we were given from the soup kitchen, reheated by lighter-light, like candle light only for poor people; it’s safe to say I didn’t know much about budgeting and when I finally got my income support (as I was still in college studying my A levels at this time which I later dropped out of studying due to homelessness), I thought £10 would be enough to feed myself for two weeks. It wasn’t. This demonstrates how setting a poor budget can have a negative impact on a person, let alone a business, I was left living off of friend’s parent’s hospitality as a result of my own poor budgeting, likewise, if a business decides they will spend £100 on advertising a product they’ve spent millions of pounds developing and bringing to market, it’s safe to say this isn’t going to go very far and it is very likely whatever the business is selling will not recuperate it’s costs. Can you imagine Apple setting a £100 advertising budget for their next iPhone? Well, we’d all be scratching our heads and asking what next iPhone if that were the case.

    It goes without saying that budgets have a direct impact on cashflow, especially in the short term. Increasing a budget will definitely lower the amount of cash your business has at the end of each month over the short term though, most businesses increase budgets to increase productivity and if targets are set and achieved in line with budget increases, over a longer period of time, cash flow will be benefitted. Likewise, if we decrease budgets, cashflow will be improved over the short term but because of lower productivity, volume of sale can be impacted which will have a negative impact on cashflow over a longer duration. From an economic standpoint, budgets should only be lowered temporarily until alternative measures are made to better spend less money but achieve the same or better results.

Organisations demonstrate value to shareholders (or the public in the case of government organisations) in the sense that budgets allow shareholders (or the public) to see how efficient and effective services are comparative to the money spent and therefore enabling them to gauge the financial return from this spending. They can also compare budgets to the budgets of previous years to compare how they performed over time, thus allowing organisations to tweak budgets where necessary to drive performance relative to previous performance and reports; for example, if I invested in billboard advertising, leaflet distribution and radio advertising for my business and my overall budget was £5000 one year and I invested all of this equally between the three mediums and what I saw was radio advertising to be most effective, I could adjust my budget proportion more of my budget to this medium and less in whatever advertising medium was performing least effectively and vice versa to try and improve the performance of the low-effective advertising method though I personally wouldn’t advise throwing good money after bad unless you are certain you will achieve the different result which is unlikely if you do not adjust how to plan to achieve the result you are after.

In the case of an organisation setting a budget for a department within itself, budgets can either give independence and freedom to workers within a department or it can take it away. Departments with high budgets may not necessarily have to worry too much about making a mistake because there is a large enough reserve in their budget to cover it, likewise if the budget is too low, departments may not be able to afford any margin of error whatsoever due to not having enough in their budget to rectify anything that may go wrong on any project.

Furthermore, budget controls or targets can reduce the productivity within a department, if a department is set a target to operate under 2% of their budget, using the remaining two percent as contingency, it could put further stress on a department who could really utilise that 2% well; this can negatively impact the business overall for fear of repercussions should they use the 2% unwisely or in a non-worst case scenario.

Some organisations, especially government organisations, have a “if you don’t use it, you don’t need it” approach to budgets whereby if a department within the organisation do not use all their budget, they will be deemed not to need such a high budget and consequently, their budget will be reduced. This means departments can be prone to wasting money or using money not so effectively as they could had it not been for such ridiculous rules, if less people get sick one year and a community health centre spends less of their budget on treating patients as a result, therefore not using all of their treatment budget, they could find their budget cut next year when the usual amount of people get sick, therefore having a negative impact on the service overall as well as the service users. A real example of this is Leicester City Council who asked everyone in the block of flats my partner lives in if they have any objections to having the paving in the garden replaced with the same paving slabs when there is absolutely nothing wrong with the paving slabs in the garden already, in fact, it’s quite pleasant. Leicester Council needed to waste money because they are within their budget and if they don’t they will get less of a budget next year so they are wasting it by replacing already good slabs when the communal front door is the only one on the street without an intercom system but the budget for building improvements had been used up.

Next, we will talk about some common types of budgeting as later, we will be preparing budgets to demonstrate three of the five budgets we will be defining. The five common types of budget are;

• Cash Flow Budget: A cash flow budget (or cash budget) is used to forecast how much and where cash will be spent and received. It is used to project performance and therefore set targets and goals. Cash flow budgets are typically set by looking at past performance and trying to match or better past performance but it can also be (and for start-ups, usually is) set based on expected sales volume, expected sales revenue and expenses, if expenses are higher than expected sales revenue, then either volume or product prices need to be increased, prices should only be set based on cost of sale plus preferred profit margin (which is based on cost of overheads first and demand for the product second, if demand is low you may need to reduce your prices and if demand is high, you should look to charge more; the most economically preferential pricing strategy would be to pay only as much as the majority of customers are willing to pay whilst taking into account factors such as cost of sale and other overheads).
• Sales Budget: Sales budgets are one of the core, fundamental budgets a business will have, they’re extremely important for small businesses especially as it allows them to keep expenses in line whilst maximising profits. This is done by allocating more or less cash towards expenses where appropriate to either increase production and therefore sales or to decrease the overall cost of sale.
• Expenses Budget: Expenses budgets are used most commonly at home as well as in businesses and is simple to understand, expenses budgets are simply where a person or organisation allocates a specific amount of money to each individual expense, a person in debt may allocate less cash towards their phone bill (which in this example would be their expense) whilst using the money saved from this reduction to repay a debt.
• Production Budget: Production budgets are used in manufacturing businesses to show how many units of something can be manufactured within the allocated finance available, it can also be used to determine how much cash would be needed to produce a specific amount of units of a product. Production budgets are also considered when monitoring “pull through”, the term given to the act of customers buying items to go with something, for example, Electrocomponents PLC sell Raspberry Pi, their pull through are the accessories they sell alongside it, my friend is a senior pricing manager for the company whose responsibility is to set prices in line with cost of production whilst also taking into account factors such as supply and demand though admittedly, due to company confidentiality and data protection, he is unable to give me further details but because Electro-Components PLC are a public company, the data may be available elsewhere (this gives me another important thing to tell you about in regards to the importance of budgets which we will cover after this.
• Capital Budget: Capital budgets are used by organisations to allocate cash for the acquisition and maintenance of fixed assets including land, equipment and property.

Before I prepare my own budgets, I would like to mention one more thing that is important to bear in mind when it comes to budgets, this is mostly true for private limited and public companies, budgets bring value to stakeholders and shareholders of an organisation, they allow these individuals (and the board of directors) an insight into spending and performance without having to analyse each individual transaction but why not just look at the cash flow you might ask? Well, the cash flow report itself means very little without budgets as it doesn’t indicate performance, to monitor the performance from a financial standpoint you have to be able to see whether or not expenses are in line with budgets and then examine whether or not the income as a result of this spending is adequate and meets expectations, if it does not or the budgets are bringing in less income than the size of the budget, it shows bad performance and where changes need to made. Without properly documented budgets, it’s very difficult to see where money could be better spent and where money may be wasted.

The budgets I will prepare will be cashflow budgets, sales budgets and expenses budgets and analyse the impact on these budgets depending on changes in costs and therefore selling prices:

Cashflow Budget:

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Year 1

Year 2

Year 3

Cash Inflow

Leaflet Distribution Sales

14400

37440

56160

Mobile Advertising Sales

13200

14400

14400

Total Inflow

27600

51840

70560

Cash Outflow

Yearly Fixed Costs

0

139

139

Lease/Business Rates

6000

6000

6000

Vehicle Purchase

0

0

0

Distributor Commission

3600

9360

14040

Rider Commission

2640

2880

2880

Contingency Payment

2760

5184

7056

Total Outflow

15000

23563

30115

Net Cashflow

12600

28277

40455

Cumulative Cashflow

12600

40877

81322

Moving Average of net cashflow per year: £27110.66

(Divide above values by 4 for quarterly budget for year 2 and 3 or see following page for year one quarterly budget)

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Quarterly Cashflow Budget:

Year 1

Q1

Q2

Q3

Q4

Year Totals

Cash Inflow

Leaflet Distribution Sales

3600

3600

3600

3600

14400

Mobile Advertising Sales

3300

3300

3300

3300

13200

Total Inflow

6900

6900

6900

6900

27600

Cash Outflow

Yearly Fixed Costs

0

0

0

0

0

Lease/Business Rates

1500

1500

1500

1500

6000

Vehicle Purchase

0

0

0

0

0

Distributor Commission

900

900

900

900

3600

Rider Commission

660

660

660

660

2640

Contingency Payment

690

690

690

690

2760

Total Outflow

3750

3750

3750

3750

15000

Net Cashflow

3150

3150

3150

3150

12600

Cumulative Cashflow per quarter

0

3150

6300

9450

18900

    Moving average of cumulative cashflow per quarter: £4725

    Analyses of Cashflow Budget:

We’re going to take my cashflow budget (above) and analyse the impact of various changes in costs and pricing and explain how this would impact the prices I charge for my services as a result of the changes in costs.

    So, our net cashflow at the end of year one is £12’600, this is a good amount for the first year provided all my forecasts and projections are correct but let’s just imagine what would happen if my leaflet distributors demanded a 10% pay increase. So, the distributor commission in Year One would rise from £3600 to £3960, this would then have an impact on my expenses budget because my yearly expenses would rise £360, that’s an extra £30 per month, this will negatively impact my breakeven point meaning I would have to make more sales to break even unless I add an additional £1.88 to each unit price whilst still maintaining sales quantity to break even at the same point I would have had my distributors not demanded a higher level of commission.

    On the other hand, the unlikeliest events has happened and the local authority decides to lower business rates, now my business rates and lease budget can be lowered to reflect this, so let’s say the local authority lowers business rates by 5%, that means my yearly budget can also be lowered by 5%, therefore increasing my overall profit because my expenses will be less. Currently, my year end lease and business rates budget is projected to be £6000, a 5% decrease would be -£300, making the overall budget £5700, these savings can be passed on to my customers so my year end revenue from leaflet distribution alone would now be £720 less making the year end leaflet distribution revenue £13680 at a unit price of £28.50; of course, so distributors would maintain the same amount of commission, this would require us to raise their commission by 5% also.

    To conclude my analysis, it is important to identify cost increases and decreases in overall costs and reductions in profits and because of these changes, one may need to change selling prices to accommodate this, it is also to be mindful how changes in budgeting activity can impact the break-even point which necessitates changes in pricing to maintain the same level of profits.

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Sales Budget:

Year 1

Q1

Q2

Q3

Q4

Year Total

Leaflet Distribution

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Sales Units

16

16

16

16

64

*Price per unit

150

150

150

150

.

Mobile Advertising

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Sales Units

3

4

4

4

18

*Price per unit

300

300

300

300

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Total Sales Revenue

3300

3600

3600

3600

3600

Moving Average of Total Sales Revenue per quarter: £1185.25

Leaflet Distribution: Each unit = 5000 leaflets to be delivered (in Q1, 16×5000=amount of leaflets distributed), each 5000 leaflets delivered will cost approximately £150 (target price), depending on distribution service selected by customer and the weight of their leaflets, this price can either rise or fall.

Mobile Advertising: Each unit = 1 week of advertising per board.

    Analysis of Sales Budget:

    To analyse the sales budget, we must first understand the figures. Sales units referred to the amount of minimum orders required for sustainable growth and development, this multiplied by the cost of the minimum order (£30 for 5000 leaflets) will give us our total sales revenue for leaflet distribution alone, if we then factor into our equation the minimum target sales of mobile advertising, which is equivalent to one week of advertising between agreed hours, multiplied by the price (£300, this is for one week) will give us our overall amount of sales revenue or singularly, the mobile advertising revenue in any quarter.

    The reason Q1 has slightly less target orders than the following quarters is because we would use the time we would allocate to completing orders to marketing our service, as we will only have one board to trial the service, we would later have to plan further marketing in accordance with achieving targets, in doing so we can look towards purchasing more advertising boards.

    Our end of year total sales revenue is £29’280, however this can fluctuate depending on multiple factors, including, obviously, whether or not we hit our targeted projections. It can also be influenced by a rise or fall in operational costs or prices our customers pay as a result of this. The media is rife with stories of employers being taken to court by self-employed workers demanding the same rights and privileges as employed workers, in some cases rightfully so, such as those contracted by Pimlico Plumbers, a London plumbing company, who demanded that during contracted hours, they used Pimlico branded equipment and workwear, did not work on other contracts during their hours and that contractors work a minimum number of hours each week (source: https://www.ft.com/content/259618fe-ef87-11e6-ba01-119a44939bb6); whilst in other cases, like the cases of the Uber driver’s investing in their own enterprise by financing a bigger car for better private hire jobs and then claiming it is Uber’s fault because there may not be many riders using the XL service we are referring to and therefore, because of finance repayments and cost of fuel and the amount of hours they are “forced” to work, their income minus expenses equals to less than minimum wage and they now want employee rights because of their own bad decisions, perhaps thee cases ae not so rightful.

    That being said, my contracted self-employed workers will be able to relate more with the former example and therefore, I must be prepared for a time where I may be forced to consider all of our distributors, though they will be allowed to distribute their own leaflets they source elsewhere along our routes (with the bonus of being able to provide GPS tracking when we get to that stage to their own customers), employees and therefore have to pay a set minimum wage, we could find our prices being forced to rise as minimum wage increases; this means our sales revenue will increase in line with rises to the minimum wage and on the face of it, this looks fantastic, the higher the minimum wage, the higher our sales revenue but our expenses would also increase relative to our sales revenue and depending on whether or not our customers are willing to pay higher prices will depend on whether or not we are in a better or worse off position financially, if we are forced to sacrifice profit as a result of customer’s not willing to pay increased prices as a result of higher costs, it will take us longer to break even.

    Down the line, as we establish ourselves in the market, we will be paying our workers better wages for the sheer physical labour we will expect from them as we build a reputable brand, therefore, though this is not reflected in the budget as it will not be until we are financially strong enough to do so and this may take more than one year, our revenue will increase as a result but if an accountant were to look at our budgets, they would see that not everything quite met the eye. A fall in costs, such as if we were to downsize our premises due to simply not needing so much room for our operations (though I daresay this is unlikely, given previous experience) would mean our overall profit would be higher but in terms of the sales budget, that would remain the same.

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Expenses Budget:

Expenses Year 1

Q1

Q2

Q3

Q4

Year Totals

Yearly Fixed Costs

0

0

0

0

0

Lease/Business Rates

1500

1500

1500

1500

6000

Vehicle Purchase

0

0

0

0

0

Distributor Commission

900

900

900

900

3600

Rider Commission

660

660

660

660

2640

Contingency Payment

690

690

690

690

2760

Total Expenses

3810

4050

4050

4050

15960

Moving average of Total Expenses per quarter: £3990

Start up £3151

Analysis of Expenses Budget

Our yearly fixed costs are £0 in year one because these were accounted for in the start-up costs, however, in the next budgeting period, there will be a cost of £139 in the first quarter of that period and includes things like insurance and vehicle tax, variable on changes in circumstances and other factors, should these rise, it will impact our overall year total expenses by increases them and if they fell, the opposite would happen. In regards to fixed costs, I appreciate lease and business rates are typically a fixed cost but in the first year, we do expect to move premises so as a result, this is reflected to show the budget we have set in place to cover business rates and the cost of the lease; at the time of writing, business rates are set to change due to local authority changes shortly too which is why this is factored into the same budget. During the start of the first year, I will use my personal phone to handle calls which will be changed to a dedicated business line when it is financially viable to do so, due to this, it is omitted from our expenses as initially, there will be no business expense associated to my mobile phone due to terms and conditions with my network provider and when this expense is due to be factored in, we shall cover this expense using the contingency budget until the following accounting period; we aim to have a dedicated business line before the first quarter of next period. These changes to our future expenses budgets (or this one as a result of possible contingency payments to cover the cost of a business line for the remainder of the first year) will affect our total expenses at the end of each quarter and, as a consequence, our total expenses will be lower.

If one of our distributors decided to leave or were no longer sustainable due to low order quantities, for example (this will effect sales revenue but that isn’t reflected in our expenses budget because it’s an expenses budget) our expenses for that quarter and every quarter they were not replaced following would be lower, bringing our year total down (though if a worker was no longer sustainable due to lower orders, that could affect sales revenue unless we increased priced).

One factor in our budget that is directly relative to our sales revenue is our contingency budget; regardless of how high our other costs are, the proportion of income paid into the contingency fund (to cover unexpected and emergency overheads) will remain constant for the foreseeable future (currently, this is 10% of overall revenue). Our contingency payments will be a voluntary payment into a separate business account, we could also use this to cover the cost of incentives given to workers to achieve targets and other such purchases however, foremost it will be for unforeseen and emergency overheads.

To conclude our budgets, I will draw attention to the side by side comparison of each budgets and explain why there is a discrepancy within the budget targets, this was done purposefully whereby the cashflow budget shows what we need to sustain growth and meet our business objectives whereas the values contained in our expenses and sales budgets are targets we hope to achieve and we allow an amount of room either way to ensure we do stay in line and on target with our cashflow budget as this budget is the most crucial for us to achieve our business goals.

Final Note: In regards to our contingency fund, any deductions will be properly documented and any expenses will be included in tax assessments, in line with the HMRC rules. The contingency fund will literally be a cash reserve serving the same purpose as personal savings only for the business. Alongside this, tax is not factored into our budgets though we will be required to pay corporation tax which, at the time of writing, currently stands at 20% though I expect this is likely to change once Britain triggers article 50 to leave the EU, on the other hand it may rise, either way, our expenses will rise or fall relative to this and this may mean an increase in prices that our customers pay, therefore increasing our sales revenue but again, without comparing it to the expenses budget, means very little.

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Appendix A: Financials Extended – Cashflow, PnL, breakeven, budgets

CASHFLOW Year 1

January February March April May June July August September October November December
# Distributors 1 1 1 2 2 2 3 3 3 4 4 4 A A) Adjust these numbers to see how a change in the amount of distributors employed in any month affects financials.
# Different Leaflets Per Letterbox 1 1 1 1 1 1 1 1 1 1 1 1 B
# Billboard Riders 0 1 1 1 1 1 1 1 1 1 1 1 C
# Vehicles 0 0 0 0 0 0 0 0 0 0 0 0 D
Month January February March April May June July August September October November December Year End Total
Cash Inflows B) Adjust these numbers to see how the amount of different leaflets being posted at the same time can affect financials.
Distribution 480 480 480 960 960 960 1440 1440 1440 1920 1920 1920 14400
Billboards 0 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 13200
Total Cash In 480 1680 1680 2160 2160 2160 2640 2640 2640 3120 3120 3120 27600
Cash Outflows
Total Start Up Costs 3151 3151 C) Adjust these numbers to see how the amount of billboard riders in any month can affect financials.
Yearly Costs 0 0
Distributor Commission (25%) 120 120 120 240 240 240 360 360 360 480 480 480 3600 E
Billboard Rider Commission (20%) 0 240 240 240 240 240 240 240 240 240 240 240 2640 E
Lease & Business Rates 500 500 500 500 500 500 500 500 500 500 500 500 6000
Vehicle Purchase 0 0 0 0 0 0 0 0 0 0 0 0 0 D) Adjust these numbers to see how the amount of vehicles in operation in any given month can affect financials.
Vehicle Running Costs (£100 per month per vehicle) 0 0 0 0 0 0 0 0 0 0 0 0 0
Contingency Payment (10% overall revenue) 48 168 168 216 216 216 264 264 264 312 312 312 2760
Total Cash Outflow 3819 1028 1028 1196 1196 1196 1364 1364 1364 1532 1532 1532 18151
Balance -3339 -2687 -2035 -1071 -107 857 2133 3409 4685 6273 7861 9449 25428
Contingency Budget Balance 48 216 384 600 816 1032 1296 1560 1824 2136 2448 2760 15120 E) The commission is paid to distributors and riders as earnings and is determined by the amount of leaflets they deliver and how many doors they will deliver to. Distributers will be responsible for their own tax in line with HMRC rules for self-employed workers.
Total Balance -3291 -5762 -7413 -7884 -7175 -5286 -1857 3112 9621 18030 28339 40548 60982

CASHFLOW Year 2

January February March April May June July August September October November December
# Distributors 5 5 5 6 6 6 7 7 7 8 8 8 A A) Adjust these numbers to see how a change in the amount of distributors employed in any month affects financials.
# Different Leaflets Per Letterbox 1 1 1 1 1 1 1 1 1 1 1 1 B
# Billboard Riders 1 1 1 1 1 1 1 1 1 1 1 1 C
# Vehicles 0 0 0 0 0 0 0 0 0 0 0 0 D
Month January February March April May June July August September October November December Year End Total
Cash Inflows B) Adjust these numbers to see how the amount of different leaflets being posted at the same time can affect financials.
Distribution 2400 2400 2400 2880 2880 2880 3360 3360 3360 3840 3840 3840 37440
Billboards 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14400
Total Cash In 3600 3600 3600 4080 4080 4080 4560 4560 4560 5040 5040 5040 51840
Cash Outflows
Total Start Up Costs 0 0 C) Adjust these numbers to see how the amount of billboard riders in any month can affect financials.
Yearly Costs 139 139
Distributor Commission (25%) 600 600 600 720 720 720 840 840 840 960 960 960 9360 E
Billboard Rider Commission (20%) 240 240 240 240 240 240 240 240 240 240 240 240 2880 E
Lease & Business Rates 500 500 500 500 500 500 500 500 500 500 500 500 6000
Vehicle Purchase 0 0 0 0 0 0 0 0 0 0 0 0 0 D) Adjust these numbers to see how the amount of vehicles in operation in any given month can affect financials.
Vehicle Running Costs (£100 per month per vehicle) 0 0 0 0 0 0 0 0 0 0 0 0 0
Contingency Payment (10% overall revenue) 360 360 360 408 408 408 456 456 456 504 504 504 5184
Total Cash Outflow 1839 1700 1700 1868 1868 1868 2036 2036 2036 2204 2204 2204 23563
Balance 11210 13110 15010 17222 19434 21646 24170 26694 29218 32054 34890 37726 282384
Contingency Budget Balance 3120 3480 3840 4248 4656 5064 5520 5976 6432 6936 7440 7944 64656 E) The commission is paid to distributors and riders as earnings and is determined by the amount of leaflets they deliver and how many doors they will deliver to. Distributers will be responsible for their own tax in line with HMRC rules for self-employed workers.
Total Balance 54878 71468 90318 111788 135878 162588 192278 224948 260598 299588 341918 387588 2333836

CASHFLOW Year 3

January February March April May June July August September October November December
# Distributors 9 9 9 10 10 10 10 10 10 10 10 10 A A) Adjust these numbers to see how a change in the amount of distributors employed in any month affects financials.
# Different Leaflets Per Letterbox 1 1 1 1 1 1 1 1 1 1 1 1 B
# Billboard Riders 1 1 1 1 1 1 1 1 1 1 1 1 C
# Vehicles 0 0 0 0 0 0 0 0 0 0 0 0 D
Month January February March April May June July August September October November December Year End Total
Cash Inflows B) Adjust these numbers to see how the amount of different leaflets being posted at the same time can affect financials.
Distribution 4320 4320 4320 4800 4800 4800 4800 4800 4800 4800 4800 4800 56160
Billboards 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 14400
Total Cash In 5520 5520 5520 6000 6000 6000 6000 6000 6000 6000 6000 6000 70560
Cash Outflows
Total Start Up Costs 0 0 C) Adjust these numbers to see how the amount of billboard riders in any month can affect financials.
Yearly Costs 139 139
Distributor Commission (25%) 1080 1080 1080 1200 1200 1200 1200 1200 1200 1200 1200 1200 14040 E
Billboard Rider Commission (20%) 240 240 240 240 240 240 240 240 240 240 240 240 2880 E
Lease & Business Rates 500 500 500 500 500 500 500 500 500 500 500 500 6000
Vehicle Purchase 0 0 0 0 0 0 0 0 0 0 0 0 0 D) Adjust these numbers to see how the amount of vehicles in operation in any given month can affect financials.
Vehicle Running Costs (£100 per month per vehicle) 0 0 0 0 0 0 0 0 0 0 0 0 0
Contingency Payment (10% overall revenue) 552 552 552 600 600 600 600 600 600 600 600 600 7056
Total Cash Outflow 2511 2372 2372 2540 2540 2540 2540 2540 2540 2540 2540 2540 30115
Balance 40735 43883 47031 50491 53951 57411 60871 64331 67791 71251 74711 78171 710628
Contingency Budget Balance 8496 9048 9600 10200 10800 11400 12000 12600 13200 13800 14400 15000 140544 E) The commission is paid to distributors and riders as earnings and is determined by the amount of leaflets they deliver and how many doors they will deliver to. Distributers will be responsible for their own tax in line with HMRC rules for self-employed workers.
Total Balance 436819 489750 546381 607072 671823 740634 813505 890436 971427 1056478 1145589 1238760 9608674

P&L

Year 1 Year 2 Year 3
Sales 27600 51840 70560
Distributor Commission 3600 9360 14040 < Cost of Sales
Rider Commission 2640 2880 2880 < Cost of Sales
Gross Profit 21360 39600 53640
Yearly fixed costs 0 139 139
Lease and business rates 6000 6000 6000
Vehicle purchase 0 0 0
Vehicle running costs 0 0 0
Contingency Payments 2760 5184 7056
Net Profit 12600 28277 40445

Charts and Graphs

Year 1 Year 2 Year 3
Total Revenue 27600 51840 70560
Total Expenses 18151 23563 30115
Profit/Loss 9449 28277 40445
Datasets for charts Profit/Loss
Year 1
Total Revenue 27600 Year 1 9449
Total Expenses 18151 Year 2 28277
Year 2 Year 3 40445
Total Revenue 51840
Total Expenses 23563
Year 3
Total Revenue 70560
Total Expenses 30115

Cashflow Budget

Year 1 Year 2 Year 3
Cash Inflow
Leaflet Distribution Sales 14400 37440 56160
Mobile Advertising Sales 13200 14400 14400
Total Inflow 27600 51840 70560
Cash Outflow
Yearly Fixed Costs 0 139 139
Lease/Business Rates 6000 6000 6000
Vehicle Purchase 0 0 0
Distributor Commission 3600 9360 14040
Rider Commission 2640 2880 2880
Contingency Payment 2760 5184 7056
Total Outflow 15000 23563 30115
Net Cashflow 12600 28277 40445
Cumulative Cashflow 12600 40877 81322

Sales Budget

Year 1 Q1 Q2 Q3 Q4
Leaflet Distribution
Sales Units 16 16 16 16
*Price per unit 30 30 30 30
Mobile Advertising
Sales Units 3 4 4 4
*Price per unit 300 300 300 300
Total Sales 1380 1680 1680 1680
Leaflet Distribution: Each unit = 5000 leaflets to be delivered.
Mobile Advertising: Each unit = 1 week of advertising per board.

Expenses Budget

Expenses Year 1 Q1 Q2 Q3 Q4 Year Totals
Yearly Fixed Costs 0 0 0 0 0
Lease/Business Rates 1500 1500 1500 1500 6000
Vehicle Purchase 0 0 0 0 0
Distributor Commission 900 900 900 900 3600
Rider Commission 720 960 960 960 3600
Contingency Payment 690 690 690 690 2760
Total Expenses 3810 4050 4050 4050 15960