Principles of Business Finanace

Principles of Business Finance

Coming into the module I was quite nervous as I have had little or no experience dealing with accounts. I do have a background in maths so I was optimistic and excited to learn something completely new.

1. Legal Framework

The first week we studied the basic legal framework, this was fine, it was an interesting first glimpse into accounting. We went through all the different types of business, from sole traders to private limited companies to franchises.

2. Cash Flow

Once we studied cash flow I was able to, outline the importance of cash in ensuring the long term viability of the entity, as well as reviewing the importance of cash flow. I feel that cash flow is one of the most important factors in small business; I think that the importance is not as high in larger companies as they have a bigger margin, and don't need to demand payment from your clients

Hotel and Spa - planned receipts and payments for next six months

Sales 2005 Jan Feb Mar Apr May June Total

CafÐ"© Shop 12,000 14,000 14,500 7,000 10,000 12,000 69,500

Products 5,000 6,000 5,500 3,000 4,000 5,000 28,500

Juice Bar 3,000 2,500 1,800 2,000 2,300 3,000 14,600

Treatments 7,000 7,500 8,000 7,000 5,000 5,500 40,000

Hire charge 1,300 1,500 2,300 2,000 1,800 3,000 11,900

Total 28,300 31,500 32,100 21,000 23,100 28,500 164,500

Here is an example that I did at the start of the Module. I found this simple to understand, but I did struggle with the language at first. This was only simple multiplication so once the initial figures had been done then you can use Excel to do the rest for you.

3. Budget systems

I learnt the relevance of a budget, and the advantages and disadvantages of a budget. I understand the need for budgets and budgetary control. I can now also list the stages involved in operating a budgetary control system. This is another very important part of the business, if you get your budget wrong and you end up underestimating, then you can seriously cut your profit margin or even losing money.

4. Cost Behaviour

I understand the importance of keeping proper stock control records. I found the labour control very interesting. We learnt about the different types of cost and the methods of allocating costs but most of all I enjoy breaking down the costs.

Hotel & Spa Cash Budget

Jan Feb Mar Apr May Jun Total

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Receipts

CafÐ"© Shop (cash) 12,000 14,000 14,500 7,000 10,000 12,000 69,500

Juice Bar (cash) 3,000 2,500 1,800 2,000 2,300 3,000 14,600

Products (cash) 5,000 3,000 2,750 1,500 2,000 2,500 16,750

" (credit) 3,000 2,750 1,500 2,000 9,250

Treatments (cash) 2100 2,250 2,400 2,100 1,500 1,650 12000

" (credit) 4,900 5,250 5,600 4,900 3,500 24,150

Hire charge (cash) 1,300 1,500 2,300 2,000 1,800 3,000 11,900

Total income 23,400 28,150 32,000 22,950 24,000 27,650 158,150

Payments

Stock - cafÐ"© (credit) 4800 5600 5800 2800 4000 4800 27800

Stock - bar (credit) 1200 1000 720 800 920 1200 5840

Equipment (cash) 1,300 1,500 2,300 2,000 1,800 3,000 11,900

Treatments (cash) 1750 1875 2000 1750 1250 1375 10000

Products (cash) 1,250 750 2,750 1,500 2,000 2,500 10,750

" (credit) 1,250 750- 2,750 1,500 2,000 10,750

Wages (cash) 1500 1500 1500 1500 1500 1500 9000

Fixed costs (cash) 1000 1000 1,000 1000 1000 1,000 6000

Total expenditure 12,800 14,475 16,820 14,100 13,970 17,375 92,040

Opening balance 50,000

Total income 158,150

Less total expenditure 116,110

Closing balance Ð'Ј116,110

5. Pricing and Costing

This lecture was very informative; we started to look at gross profit, and what it actually is. We looked at the difference between margin and mark-up. In found this the most challenging as there were a lot of new terms to learn and understand. I enjoyed the pricing techniques. Pricing goods seems to be relatively simple.

6. Profit and Loss Account

I found this very interesting I found that it was very complicated at the beginning, but it cleared up the more I did them and reviewed different company's accounts. Although each company does an account, they can cover things up and increase margins, but when you start looking deeper, you get to see a clearer picture.