Financial planning 3 27 Financial planning and change

Financial planning . 3 27

Financial planning and change Most financial plans are fairly routine and predictable. . . but it is important for business to plan for change! 3. 27 Financial planning

Reasons for change Change can occur because of: · · · Expansion/an increase in sales Unexpected events Reductions in costs New, unexpected opportunities New competitors entering the market New Government/EU regulations 3. 27 Financial planning

Financial implications of change Any changes will result in: · An increase or decrease in costs · An increase or decrease in sales revenue · An increase or decrease in profits 3. 27 Financial planning

Financial planning techniques · Costing new products or services or changes to existing operations · Break-even – to check the outcome if costs or revenue changes · Cashflow – to check the effect on the bank account and see if external funding is needed · Budgets – to monitor spending after the change 3. 27 Financial planning

Final accounts The profit and loss account and balance sheet record the result of the action(s). · The profit and loss account will show if costs have fallen/risen and if profit has increased/decreased. · The balance sheet will show the effect on assets, creditors and shareholder’s funds. 3. 27 Financial planning

The effect of change on financial plans · Individual departments have to adjust their budgets · The financial picture of the business will change · Investors (eg shareholders) will be concerned about their investment and want reassurance extra money is being spent wisely · Creditors will be concerned the business can still pay its debts 3. 27 Financial planning

Summary Good financial planning is: · Always important · Vital if the business is expanding · Crucial if the business has problems 3. 27 Financial planning