Business is all about the management of products, services and money. To enable management to do their job, the tool they need is management information.
Information relating to business performance is transmitted via management accounts. These are therefore a very powerful and essential reporting mechanism requiring high priority attention. Successful businessmen understand how money works but need to have the information to support the decision making.
- Calculate the break-even point of your business and how soon you can reach it. Take into consideration all the costs involved:
- Direct Costs are generally straight forward to identify as they relate specifically to a product: e.g. labour, material and shipping costs.
- Indirect costs, for example rent and service charges, need to be included in the general overheads and a proportion of those general overheads will need to be added to the cost of each product to arrive at its true cost. The principle is that overheads also need to be covered and therefore “the overhead recoupment cost” is an important financial that needs to be kept up to date to make sure that your sales prices cover all the costs of running the business.
- Give amount of overdraft / funds needed as shown in cash flow forecast.
- Can you offer any security to support your financial requirements?
- Over what period will loan/overdraft be repaid and are these repayments included in the cash flow forecast?
- How much do you and your partners plan to invest in the business?
- Do you have access to other sources of funds? Give details if any.
- Do you have any contingency plans if your sales turn out to be lower or the costs higher than your forecast?
- Have you taken account of tax consideration in your calculations?