Financial Planning Cash flow pro forma statement Income

Financial Planning

Cash flow pro forma statement Income statement Balance sheet Usually prepare for 3 years projection

Involve all type of cost to enable company to start the operation (whether short term or long term) Purpose: to estimate total budget required in order to start with the business Short term cost working capital required until business able to gain sales working capital depends on how long business able to get profit from the sales Long term cost Involve capital investment i. e. machine, plant and equipment

Capital Investment Land Buy or own – list in project cost Lease- a part of deposit Building Buy or own – current cost of the building Lease – list in deposit Renovation Machine and Equipment Rent – list in deposit Hire purchase – current cost Furniture and office equipment Vehicles Rent – list in deposit

Expenses for : Legal fee Company registration License fee Expertise services Feasibility studies Insurance etc

Allocation for financing the daily operation such as Buy raw material Inventory Administrative expenses Factory overhead Other expenses involve company’s operation Working capital is usually prepared for 1 to 3 months depending on how long the company able to gain its first sales

To overcome increases in material price Miscalculation during preparing the project implementation cost Usually 5 – 10% from project cost

Salary Fee Accounting Bank charge Maintenance and repair Electric, water and telephone Insurance Rental Legal fees Post & stamp Printing & stationary Staff training travelling

Promotion 1% of total Example: sales Sales projection = 283, 880 Promotion expenditure = 2840 Delivery Fluctuate from year to year Estimate from previous year Vehicle expenditure Semi fluctuate Fixed component Road tax Insurance of vehicle Fluctuate component Estimation of 0. 3% from sales average rate

ADMINISTRATIVE EXPENDITURE Fixed Assets MARKETING EXPENDITURE RM Fixed Assets OPERATIONS EXPENDITURE RM Fixed Assets RM Land & Building 50, 000 Furnitures 9, 000 Signboard 5, 000 Machinary and Equipment 100, 000 Computer 5, 000 van 70, 000 Lorry 80, 000 Renovation 30, 000 Forklif 130, 000 Equipment 7, 000 Working Capital Salary, EPF & SOCSO 10, 000 advertisement and promotion 1, 000 Raw Materials & Packaging 39, 000 Travelling allowance 100 Carriage Inward & Duty petrol/diesel 250 Salaries, EPF & SOCSO 3, 363 Salary, EPF & SOCSO 900 petrol/diesel 500 Other Expenditure 200 Other Expenditure 300 Other Expenditure 400 Pre-Operation Deposit (rent, utilities, etc. ) 7, 200 Deposit (rent, utilities, etc. ) Business Registration & Licences 300 Business Registration & Licences Insurance & Road Tax for Motor Vehicle 2, 000 Insurance & Road Tax for Motor Vehicle 1, 000 Other Expenditure 100 Other Expenditure 2, 200 Other Expenditure 1, 350 TOTAL 118, 800 TOTAL 81, 750 TOTAL 355, 613

ABC Construction PROJECT IMPLEMENTATION COST & SOURCES OF FINANCE Project Implementation Cost Requirements Sources of Finance Cost Fixed Assets Loan Hire-Purchase Own Contribution Existing F. Assets 50, 000 40, 000 10, 000 Furnitures 9, 000 600 5, 400 3, 000 Computer 5, 000 1, 000 4, 000 Renovation 30, 000 24, 400 5, 600 Equipment 7, 000 5, 000 2, 000 Signboard 5, 000 3, 500 1, 500 70, 000 45, 000 21, 000 4, 000 100, 000 34, 000 58, 000 Lorry 80, 000 50, 000 25, 000 Forklif 130, 000 105, 000 23, 000 2, 000 Land & Building depreciation van Machinary and Equipment Working Capital 2 months Cash 20, 004 15, 004 5, 000 4, 500 3, 300 1, 200 Operations Pre-Operations & Other Expenditure 85, 726 75, 726 10, 000 15, 050 9, 050 6, 000 Contingencies 10% 61, 128 58, 128 3, 000 TOTAL 70, 300 Administrative Marketing 672, 408 469, 708 132, 400 Total = RM 672408

For every fixed assets excluding land Methods: Straight line methods Declining balance

FIXED ASSETS Furnitures Computer Renovation Equipment Signboard van Econ. Life (yrs) 5 5 5 FIXED ASSETS Machinary and Equipment Lorry Forklif Econ. Life (yrs) 5 5 5

Fixed Asset Furnitures Cost (RM) 9, 000 Method Straight Line Economic Life (yrs) 5 Annual Accumulated Year Depreciation Book Value - 9, 000 1 1, 800 7, 200 2 1, 800 3, 600 5, 400 3 1, 800 5, 400 3, 600 4 1, 800 7, 200 1, 800 5 1, 800 9, 000 - 6 0 0 - 7 0 0 - 8 0 0 - 9 0 0 - 10 0 0 - Depreciation value per year = (Original Price – Scrap Value)/Economy Life = (9000 – 0)/5 = RM 1800/ year Scrap value = estimation of asset value at its last year of economy life

LOAN (if required) Interest rate 10% Loan duration 5 Interest payment method* 2 * Method: 1 = flat rate 2 = annual rest

HIRE-PURCHASE (if required) Interest rate Hire-purchase duration 5% 8

ABC Construction PROJECT IMPLEMENTATION COST & SOURCES OF FINANCE Project Implementation Cost Requirements Sources of Finance Cost Fixed Assets Loan Hire-Purchase 50, 000 35, 000 Furnitures 9, 000 600 Computer 5, 000 1, 000 Renovation 30, 000 Equipment Signboard Land & Building van Own Contribution Existing F. Assets Cash 15, 000 3, 000 4, 000 24, 400 5, 600 7, 000 5, 000 2, 000 5, 000 3, 500 1, 500 70, 000 45, 000 4, 000 5, 400 21, 000 Machinary and Equipment 100, 000 34, 000 58, 000 Lorry 80, 000 50, 000 25, 000 Forklif 130, 000 105, 000 23, 000 2, 000 20, 000 15, 000 4, 500 3, 300 1, 200 Operations Pre-Operations & Other Expenditure 85, 726 75, 726 10, 000 15, 050 9, 050 Loan 6, 000 Contingencies 61, 128 58, 128 3, 000 Working Capital 2 months Administrative Marketing TOTAL 10% 672, 404 464, 704 Hire Purchase 132, 400 75, 300

ABC Construction LOAN & HIRE-PURCHASE AMMORTISATION SCHEDULES LOAN REPAYMENT SCHEDULE Amount 464, 704 Interest Rate 10% Duration (yrs) Method 5 Baki Tahunan RM 464704 Principal Year 5 years Interest 464704 x 10% HIRE-PURCHASE REPAYMENT SCHEDULE Amount 132, 400 Interest Rate 5% Duration (yrs) 8 92941+46470 Total Payment. Principal Balance Year Principal Interest 464704 -92941 Principal Balance Total Payment - 464, 70 4 - 1 92, 941 46, 470 139, 411 371, 76 3 1 16, 550 6, 620 23, 170 115, 850 2 92, 941 37, 176 130, 117 278, 82 2 2 16, 550 6, 620 23, 170 99, 30 0 3 92, 941 27, 882 120, 823 185, 88 1 3 16, 550 6, 620 23, 170 82, 75 0 4 92, 941 18, 588 111, 529 92, 94 1 4 16, 550 6, 620 23, 170 66, 20 0 5 92, 941 9, 294 102, 235 - 5 16, 550 6, 620 23, 170 49, 65 0 132, 400 6 0 0 - 6 16, 550 6, 620 23, 170 33, 10 0 7 0 0 - 7 16, 550 6, 620 23, 170 16, 55 0 8 0 0 - 8 16, 550 6, 620 23, 170 - 9 0 0 - 10 0 0 -

Cash inflow and cash outflow for operation cost or buying fixed asset Cash inflow Cash sales, capital(in cash), loan, account receivable Cash outflow Raw material, administrative expenditure, factory overhead etc Balance of cash at certain period of time Usually prepared for 3 years of operation 1 st year is in monthly basis Prior to pro forma statement, sales forecasting must be prepared first (from marketing planning)

SALES PROJECTION Month 1 3, 600 Month 2 4, 000 Month 3 4, 800 Month 4 4, 800 Month 5 4, 800 Month 6 6, 000 Month 7 6, 000 Month 8 6, 400 Month 9 6, 400 Month 10 6, 000 Month 11 6, 000 Month 12 6, 000 Total Year 1 64, 800 To. Tal Year 2 74, 520 Total Year 3 89, 424

OPERATIONS EXPENDITURE Fixed Assets RM 100, 00 Machinary and Equipment 0 80, 00 Lorry 0 130, 00 Forklif 0 Working Capital Raw Materials & Packaging Carriage Inward & Duty Salaries, EPF & SOCSO petrol/diesel 9, 00 0 3, 36 3 50 0 Other Expenditure 400 Pra-Operasi Deposit (rent, utilities, etc. ) Business Registration & Licences Insurance & Road Tax for Motor 1, 00 Vehicle 0 1, 35 Other Expenditure 0 325, 61 TOTAL 3 PURCHASE PROJECTION Month 1 9, 000 Month 2 10, 000 Month 3 12, 000 Month 4 12, 000 Month 5 12, 000 Month 6 15, 000 Month 7 15, 000 Month 8 16, 000 Month 9 16, 000 Month 10 15, 000 Month 11 15, 000 Month 12 15, 000 Total Year 1 162, 000 To. Tal Year 2 186, 300 Total Year 3 223, 560

assume CASH COLLECTIONS FOR SALES In the month of sale 70% 1 month after sale 20% 2 months after sale 10% Total 100%

70% MONTH 20% Pre. Operations 1 CASH INFLOW Capital (Cash) Loan 3 4 5 6 7 75, 300 398, 704 Cash Sales Collection of Accounts Receivable TOTAL CASH INFLOW 2 474, 004 2, 520 2, 800 3, 360 4, 200 720 1, 160 1, 360 1, 440 1, 680 2, 520 3, 520 4, 720 4, 800 5, 640 5, 880 10% + 20%(of the 2 nd month sales)

CASH PAYMENTS FOR PURCHASES In the month of purchase 80% 1 month after purchase 20% 2 months after purchase Total 100% 80% Operations Expenditure Cash Purchase Payment of Account Payable assume 20% 7, 200 8, 000 9, 600 1, 800 2, 000 2, 400

LHDN imposed tax to company depends on: Sole propriety and partnership - imposed tax on individual income Company under company act – imposed tax on the profits

employer contribute 12% employee contribute 11% From the employee salary

Wahab, I. A. , Ibrahim, M. D. , Ahmad, F. (2002)‘Rancangan Kewangan Perniagaan Kecil dan Sederhana’, 1 st Ed. Prentice Hall. Malaysia