Unit 3 Assignment 4: Financial Planning and Implementation (Final Accounts)
In this assignment, I will produce a range of final accounts to reflect the financial performance of our trading week where hosted a pop-up stall in one of our college campuses to sell products/services to customers, most of whom were students and staff of the college. I will then explain the similarities and differences between my forecasts and final accounts and make recommendations on steps that I should take to improve my financial performance over time.
So, to begin, I will copy my forecasts below to make comparisons easier starting with our cash flow forecast, balance sheet and profit/loss forecast, this will then be followed our actual reports:
(Above: Cashflow Forecast.)
(Above: Balance Sheet Forecast)
(Above Profit/Loss Forecast)
Next, we will copy our actual accounts;
|
|
Monday |
Tuesday |
Wednesday |
Thursday |
Friday |
Total |
|
opening balance |
£0.00 |
-£4.41 |
£10.16 |
£11.96 |
£24.01 |
|
|
raffle ticket sales |
£20.50 |
£17.30 |
£12.00 |
£14.50 |
£4.00 |
£68.30 |
|
paper airplane sales |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
|
total income |
£20.50 |
£17.30 |
£12.00 |
£14.50 |
£4.00 |
£68.30 |
|
|
|
|
|
|
|
|
|
materials |
£10.00 |
£0.00 |
£5.00 |
£0.00 |
£0.00 |
£15.00 |
|
advertising |
£4.00 |
£0.00 |
£3.00 |
£0.00 |
£0.00 |
£7.00 |
|
Paper Plane Prizes |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
|
Raffle Prizes |
£2.05 |
£1.73 |
£1.20 |
£1.45 |
£0.40 |
£6.83 |
|
miscallaneous |
£8.86 |
£1.00 |
£1.00 |
£1.00 |
£1.00 |
£12.86 |
|
total expeneses |
£24.91 |
£2.73 |
£10.20 |
£2.45 |
£1.40 |
£41.69 |
|
closing balance |
-£4.41 |
£10.16 |
£11.96 |
£24.01 |
£26.61 |
|
(Above: Actual Cashflow)
|
Balance Sheet |
|
|
|
£ |
|
Stock |
0 |
|
Debtors |
0 |
|
Cash |
26.61 |
|
Bank |
0 |
|
|
|
|
Financed by |
profit |
(Above: Actual balance sheet)
|
Actual Profit and Loss |
|
|
|
£ |
|
Income |
|
|
Raffle Ticket Sales |
68.3 |
|
Total Income |
68.3 |
|
Expenditure |
|
|
Advertising |
7 |
|
Materials |
15 |
|
Prizes |
6.83 |
|
Miscellaneous |
12.86 |
|
Total Expenses |
41.69 |
|
P/L |
26.61 |
(Above: Actual Profit/Loss)
As we can see, there are some dramatic differences between our final and forecasted accounts. The main difference being the revenue we generated throughout the week, it is substantially below our forecasted figures. This is a result of a higher sales expectation, however, as we can see in the actual financials, this was not the case. We came up with unachievable forecasts as we had done no market research prior to our trading week; it would have been impossible for us to properly gauge sales in the short amount of planning time we had. We could have improved our forecasting abilities by conducting market research prior to the trading fortnight.
This brings me on to the differences between forecasted data and actual data regarding our paper airplane contest entry sales, of which we achieved zero. This is also a result of not conducting market research to better understand our demographics. We hoped to hit on the nostalgia effect of the students who would have been slightly disruptive in their younger school years or otherwise, enjoyed them in the playground before they were banned in most schools due to the hazards they posed of poking children in the eye. As a result of very little interest, we focused on raffle ticket sales but even with that being the case, we were unable to achieve the sales we forecast but with that being said, we did make a large profit/expenses ratio; I do think we could have easily sold as many tickets without spending so much on promotional material which was quite a high cost point in the project.
Next, the expenses are far less in our actual accounts than our forecast as a result of us making the decision to remove the prizes due to them not being financially viable. We decided before we commenced trading that we will remove them from Monday’s draw at least until we have figures to work with to define whether or not we would be able to afford these expenses. As we were unable to sell tickets for the following days draws, in line with UK gambling regulations, nobody was misinformed about prizes that could be won. We did actually decide to remove the prizes completely in the end. The decision was made upon realisation of how out-of-reach our forecasted figures were.
Our total material costs increased as we realised we were falling behind our key performance targets, we hung more posters but unfortunately, to no avail, evident in our customer surveys, nobody saw our posters. We believe this is as a result of a lack of market research or poor placement.
Our inventory, as displayed in our actual balance sheets and profit/loss accounts is £1, this is almost unfathomable but this represents the value of our stock, our stock totalled £1 for a book of 1000 raffle tickets. Our opening stock could have been displayed as £1000 but this was highly unrealistic and did not accurately represent our levels of stocks as we were fully aware that it were unlikely we would meet our cash flow forecasted sales targets due to how unrealistic they were in the first place. Our forecasts profit and loss account and balance sheet was impossible to understand where the figures came from, I believe these were the result of guesswork due to no market research being conducted which affected my team member’s ability to accurately forecast our cashflow which, in turn, had a knock on effect on being able to forecast our opening stock and inventory.
Our prize expenses are significantly less too, the first prize for the daily raffle was 10% of raffle ticket sales revenue; we forecasted this to be £20 per day as a result of forecasting sales of £200 per day. In reality, if we divided our figures by 10 we would be closer to the actual figures but without conducting market research, we were unable to accurately gauge sales. Also, we removed the daily 2nd and 3rd and Friday’s 2nd and 3rd prize to which also brought our prize expenses down.
The only thing that remained nearly constant was our miscellaneous expenses, this remained constant until the final day when I was cashing up the weeks’ takings and preparing our initial final accounts. I incurred the extra business expenses as a result of purchasing three cups of tea in the church café I frequent whilst I completed our work, it was only polite.
By comparison, you could argue our trading week was a massive failure but if we were to argue this, it is as a result of poor financial planning and implementation as a result of a lack of market research being conducted. Without the comparison to our forecasts, however, I do believe our trading week was a success.
However, now we have to discuss ways in which I could improve business performance over the next three years and in fact, our forecasts are achievable over such a long time period if we plan and implement our market research properly going forward to get to know our customers better. Alongside this, it would be important to lower prices to attract the lower income earning customers and to make purchasing a higher volume of raffle tickets more attractive to higher income earning customers who would be able to purchase several more for the same price they paid. What we found was those in receipt of benefits showed high interest in our products and our charity but were unable to afford to contribute. If we sold tickets for 20p each, we may have been able to meet our sales quantity targets but this would have made it impossible to meet our sales revenue targets as we would not be able to sell out and maintain the same pricing strategy in the location we were in.
Another option we would have would be to keep the prices the same and change venues. I do not believe a college campus has a high enough footfall on a day to day basis to allow us to sell 200 raffle tickets per day. Perhaps we should have attracted customers from outside of the campus as well as from within?
I do also believe that, had my team member been more proactive and helpful during the actual trading week, we would have fared a better chance of getting closer to his unrealistic forecasts.
In conclusion, there was a lot we could do to improve our financial performance; from lowering prices to boost sales volume or keeping prices the same but change location for hopes of the same outcome. Otherwise, we could lower our targets to make them more realistic. With that being said, there is one thing that is absolutely imperative and is a lesson that is obvious within this assignment; Market Research is key to any financial success. Without market research, you cannot properly set targets and this will potentially make them unachievable which will have an impact over time on a business’ staff’s level of motivation.
Appendix A: Unit 3 Assignment 4 – End Financials – P7 M3 D1
|
|
Mon |
Tues |
Wed |
Thurs |
Fri |
Total |
|
|
opening balance |
£0.00 |
-£4.41 |
£10.16 |
£11.96 |
£24.01 |
|
|
|
raffle ticket sales |
£20.50 |
£17.30 |
£12.00 |
£14.50 |
£4.00 |
£68.30 |
|
|
paper airplane sales |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
|
|
total income |
£20.50 |
£17.30 |
£12.00 |
£14.50 |
£4.00 |
£68.30 |
|
|
|
|
|
|
|
|
|
|
|
materials |
£10.00 |
£0.00 |
£5.00 |
£0.00 |
£0.00 |
£15.00 |
|
|
advertising |
£4.00 |
£0.00 |
£3.00 |
£0.00 |
£0.00 |
£7.00 |
|
|
Paper Plane Prizes |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
£0.00 |
|
|
Raffle Prizes |
£2.05 |
£1.73 |
£1.20 |
£1.45 |
£0.40 |
£6.83 |
|
|
miscallaneous |
£8.86 |
£1.00 |
£1.00 |
£1.00 |
£1.00 |
£12.86 |
|
|
total expeneses |
£24.91 |
£2.73 |
£10.20 |
£2.45 |
£1.40 |
£41.69 |
|
|
closing balance |
-£4.41 |
£10.16 |
£11.96 |
£24.01 |
£26.61 |
|
|
|
|
|
|
|
|
|
|
|
|
Actual Profit and Loss |
|
|
|
|
|
|
|
|
|
£ |
|
|
|
Balance Sheet |
|
|
|
Income |
|
|
|
|
|
£ |
|
|
Raffle Ticket Sales |
68.3 |
|
|
|
Stock |
0 |
|
|
Total Income |
68.3 |
|
|
|
Debtors |
0 |
|
|
Expenditure |
|
|
|
|
Cash |
26.61 |
|
|
Advertising |
7 |
|
|
|
Bank |
0 |
|
|
Materials |
15 |
|
|
|
|
|
|
|
Prizes |
6.83 |
|
|
|
Financed by |
profit |
|
|
Miscellaneous |
12.86 |
|
|
|
|
|
|
|
Total Expenses |
41.69 |
|
|
|
|
|
|
|
P/L |
26.61 |
|
|
|
|
|
|