Financial Planning December 2013

Today Incorporation Assessment Bookkeeping Tax and VAT Finances Risk Social Currency

Assessment Ideas generation SWOT PEST Commercial appraisal

External Analysis PoliticalEconomicSocialTechnological These can be political factors or policy decisions that affect the operating environment These are issues that affect the purchasing power of customers and other businesses These are factors that affect customers needs and potential markets These are innovative developments or trends that might affect markets Examples: Tax Employment Environmental regulations Trade restrictions/tariffs Political stability Europe Economic growth Interest rates Inflation Unemployment Supply/Demand Demographic and cultural changes Population growth rate Social Attitudes Employment Environment Research & development Automation Technology Innovation

Registering a Social Enterprise Companies Acts require accounts, in a specified format to be filed on public record at Companies House every year –Directors’ report –(Accountants’ report) –Profit and loss account –Balance sheet –Notes to the accounts Filing deadline is 9 months after year end Penalties for late filing

Bookkeeping & Accounts It is essential to keep accurate records The purpose is to determine the success and financial health of a business Basis of paying tax Bookkeeping needs to be set out clearly so you and the tax man can understand it Don’t forget cash is everything

Bookkeeping & Accounts Bookkeeping = day to day records of income and expenditure Accounts = Summary of income and expenditure over a specific time (usually one year) Statutory Accounts (Ltd only) Management tools: –Profit and Loss –Cash Flow –Forecasts –Debtors List –Sales and Cost Analysis

What needs to be recorded? Every penny that is received and paid by the business This includes all pre-trading expenses This also includes any non-business receipts or payments, because the business books should ‘balance’ or ‘agree’ with the bank account.

Record keeping Bank account Cash book Other records –Sales/ purchase register –Detailed –No VAT – keep it simple PAYE Computer packages Diary 6 years records

Tax and National Insurance Social Enterprises are required to pay appropriate tax on business profits. Salaries taken from the business will pay P.A.Y.E. Budget for tax payments. Employer Helpline

Taxation IncomeIncome Tax rate 20013/14 Up to £9,4400% £ £ % Over £45,451- £150,000 40% Over £150,00045%

National Insurance ClassPaid byOnRate 1EmployeesUp to £7755 £7756 to £41,450 Over £41,450 Nil 12% 2% 1EmployersUp to £7755 £7756 to £41,450 Over £41,450 Nil 13.8% Corporation TaxEmployersUp to £300,00020% © Wenta 2008

VAT Registration –Compulsory if taxable supplies exceed £79,000 –Voluntary below the limit –Keep track of rolling 12 months (or next 30 days!) Penalties for late registration Apply to Customs & Excise – –

VAT (continued) Accounting for VAT –VAT returns – quarterly, monthly or annual –Invoice or cash basis –Flat rate scheme Special arrangements –Claim for equipment and stock –Importing and exporting –Standard, zero and exempt suppliers Inspections

Key Financial Considerations What are the start up costs? What are the running costs? What is your break even point? Social need vs Market demand Costs/overheads/equipment/premises Competitors/pricing

Cash Flow These are sales/ costs broken down over a fix period of time when they actually happen Pre-start costs Opening balance Money in Money out What’s left Carry it forward Real money in real time

Cash Flow Forecast JanFebMarAprMayJunJulAugSeptOctNovDecTotal Cash Sales ,000 1,500 11,500 Credit sales08001,2002,0004,000 6,000 40,000 Capital injection5,000 Total cash in5,2001,1001,7003,0005,000 5,5007,500 56,500 Suppliers ,5003,000 4,500 34,500 Capital equipment5, Travel Expenses ,800 Insurance Telephone Website Bank charges/ interest Professional fees Total cash out6,5801,0202,1803,120 3,3253,120 3,2254,620 4,72542,775 Net cash flow ,8801,6751,880 1, ,8802,77513,725 Opening balance0-1,380-1,300-1,780-1, ,6553,5355,4157,1908,07010,950 Closing balance-1,380-1,300-1,780-1, ,6553,5355,4157,1908,07010,95013,725

Risk How will you be funded? Are your financial systems adequate? How’s your cash flow? SWOT of your funding The external factors and trends affecting your business How you plan to move towards sustainability

Social Currency Although you will be measured against your financial success, as a social enterprise you have another currency. How can you measure your social impact? What are the outcomes? Who does it benefit? Why would investors care? Is it enough to justify the cost?

Useful Links Excellent websites to guide you further: Inspire 2 Enterprise: CVS: HMRC: Companies House:

Today Incorporation Assessment Bookkeeping Tax and VAT Finances Risk Social Currency

Managing Your Project: A Guide - 22 January 2014, pm. Social & Media Communications - 29 January 2014, 2-7pm Fundraising - 05 February 2014, pm. Measuring the Impact of your project - 12 February 2014, pm