Drawing Up a Business Plan

1
Drawing Up a Business Plan

• Julie Ridgway Farrah Kitabi
• 18 September 2009

2
Objectives for the session

• Prepare revenue budget cash flow forecast
• Document your assumptions
• Understand what financial information is needed
  to prepare a business plan
• Understand more about costing an event or project
  assess the risks

3
Planning

• Financial Statements are part of planning
  process.
• Decisions already made regarding the
  organisations objectives strategies before the
  financial planning begins.
• For planning, you need to incorporate the
  financial information about your own organisation
  into
• Budgets
• Cashflow Forecasts
• Forecast Balance Sheets

4
The planning cycle
Strategy
Strategy
Strategy
Strategy
Strategy
Strategy
Strategy
Annual Plan
Annual Plan
Annual plan
Annual plan
Annual Plan
Annual Plan
Evaluation Revisions
Evaluation Revisions
Evaluation Revisions
Evaluation Revisions
Evaluation Revisions
Monitoring
Monitoring
Monitoring
Monitoring

• More info
• NCVO/Cass Tools for tomorrow
• Financial Stewardship of Charities
• Boards that Work

• To include budget,
• contribution analysis
• cashflow, sensitivity analysis
• ask what ifs
• SMART objectives

5
Approval timing of plans

• Do you have an annual timetable for all
• finance matters?
• Budgets
• Management accounts
• Year end
• Audit

6
Questions Planning budgeting

• Does budget link clearly to annual plan
  strategy?
• Who approves the budget?
• Does it look realistic?
• Do you understand the key assumptions?
• What do you have on your agendas when?
• Do you have an annual cycle?
• Does planning happen at the right time?
• Has a risk assessment been done?
• How satisfied is the charity with its budgeting
  process?

7
Budgetting (1)

• To budget properly you need to understand how
  costs arise what affects them.
• Figures are meaningless unless they can be put
  into a context
• Unlikely to draw up a good revenue budget for
  next year by simply adding 5 to last years
  figures.

8
Budgetting (2)

• Look at cost headings for your organisation, can
  you analyse them into the different types of
  costs?
• Is it a cost the organisation incurs regardless
  of activities or funding?
• E.g. rent insurance on premises (fixed
  cost/indirect cost).
• Is it a cost only arising because you plan to
  undertake a certain activity?
• E.g. hall hire for an event (variable
  cost/indirect cost)?
• Is it a cost that increases when you expand the
  organisation? E.g. staff travel, staff training
  (variable cost- depends on staff number)?
• Is it a cost that varies to some extent, but has
  a core cost which is unavoidable?
• e.g. telephone - the rental costs a few calls
  are inevitable, but extra activity does push up
  the calls costs (mixed cost).

9
Key points to bear in mind for your budget?

• How do you present the budget?
• Who is your audience?
• Who checks the budget excel gremlins?
• Is the budget embedded as part of the overall
  strategy?
• How is boards input considered what do they
  want?
• Who is accountable key budget holders?

10
Case study part 1

• Revenue budget

11
Cashflow Forecasting

• Income expenditure account lacks timing
• Cash flow shows income expenditure as it
  happens.
• Need to understand how income will be paid time
  lag between undertaking the work being paid for
  it

12
Case study part 2

• Cash flow exercise

13
Planning cycle

• Does not start with numbers
• What do you want to do how
• Good budgets can only be produced as a result of
  good underlying plans
• Appropriate to think of the whole process as a
  cycle, because you have to review plans budgets
  all the time theyre alive!

14
Group discussion

• What contingencies have you had to build into
  your plans over the last year?
• What lessons have you learnt from 08/09 planning
  cycle?

15
Key points to bear in mind

• Need cash flow as well as income expenditure
  account
• Does the accuracy of the budget really matter?
• Sensitivity/contingency planning dont try to
  tweak everything a the same time
• Use what if scenarios
• How do you address seasonality simple division
  or predicted timings
• Flexing/updating the budget should you do this
  at regular intervals or would it be better to
  only do when significant events happen?

16
More information

• See resource sheet for useful websites further
  information
• Julie Ridgway
• Farrah Kitabi
• julie_at_sayervincent.co.uk
• farrah_at_sayervincent.co.uk
• Tel [phone]