1. Financial Management
Financial Planning

2. CHAPTER 12
6/1/2019
Financial Planning
Goal 1 Recognize important financial questions that must be answered in a business.
Goal 2 List the steps in budget preparation.
Goal 3 Describe three types of business budgets.

3. KEY TERMS revenue expenses budget start-up budget operating budget
cash budget

4. FINANCIAL PLANNING Beginning a business How much needed?
Where is it coming from?
Expenses?
Plan for survival until profitable

5. FINANCIAL PLANNING Ongoing operations Track income Control Expenses
Paying employees
Ordering supplies and materials
Maintaining capital goods
Updating Technology
Reduce Waste

6. FINANCIAL PLANNING Business expansion New products/services
New customers
What are the costs to expanding?

7. BASIC FINANCIAL EQUATION
Revenue – Expenses = Profit or Loss
Profit
Revenue is greater than expenses
Revenue > Expenses = Profit
Loss
Revenue is less than expenses
Revenue < Expenses = Loss

8. SOURCES OF BUDGET INFORMATION
Why? Necessary to predict income and expenses.
Financial records of the business
Small Business Administration offers tools for planning for new businesses.
D & B, S & P, Value Line
Collect and publish financial info
Business Publications – WSJ, Forbes, etc.
Business Organizations

9. DEVELOPING BUSINESS BUDGETS
PREPARE a list of each type of income and expense that will be a part of the budget
GATHER accurate information from business records and other information sources for each type of income and expense
CREATE the budget by calculating each type of income, expense, and the amount of net income or loss
EXPLAIN the budget to people who need financial information

10. Comparing Budgets 20 points
The four steps essential in creating a budget are to prepare, gather, create and explain. In Excel, PREPARE a list of each type of income and expense you anticipate in the next 90 days. GATHER information which will allow you to estimate the dollar amounts for each type of income and expense. CREATE a three month budget. EXPLAIN your budget to others in your group and discuss ways to make your budgeting process more accurate.