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 sales
Example:



Delivery



Sales projection = 283,880
Promotion expenditure = 2840
Fluctuate from year to year
Estimate from previous year average rate
Vehicle expenditure
Semi fluctuate
 Fixed component




Road tax
Insurance of vehicle
Fluctuate component

Estimation of 0.3% from sales
ADMINISTRATIVE EXPENDITURE
MARKETING EXPENDITURE
Fixed Assets
RM
Land & Building
50,000
Furnitures
9,000
Signboard
Computer
5,000
van
Renovation
30,000
Equipment
7,000
Fixed Assets
Working Capital
Salary, EPF & SOCSO
10,000
Business Registration & Licences
200
7,200
300
Insurance & Road Tax for Motor
Vehicle
Other Expenditure
TOTAL
5,000
70,000
advertisement and promotion
100
118,800
Fixed Assets
RM
Machinary and Equipment
100,000
Lorry
80,000
Forklif
130,000
Working Capital
1,000
Raw Materials & Packaging
Travelling allowance
100
Carriage Inward & Duty
petrol/diesel
250
Salaries, EPF & SOCSO
Salary,EPF & SOCSO
900
petrol/diesel
Other Expenditure
Pre-Operation
Deposit (rent, utilities, etc.)
RM
Working Capital
Other Expenditure
Other Expenditure
OPERATIONS EXPENDITURE
Other Expenditure
39,000
3,363
500
Other Expenditure
300
Other Expenditure
Pre-Operation
Pre-Operation
Deposit (rent, utilities, etc.)
Deposit (rent, utilities, etc.)
Business Registration & Licences
Business Registration & Licences
400
Insurance & Road Tax for Motor
Vehicle
2,000
Insurance & Road Tax for Motor
Vehicle
1,000
Other Expenditure
2,200
Other Expenditure
1,350
TOTAL
81,750
TOTAL
355,613
ABC Construction
PROJECT IMPLEMENTATION COST & SOURCES OF FINANCE
Project Implementation Cost
Requirements
Sources of Finance
Cost
Loan
Hire-Purchase
Fixed Assets
Own Contribution
Cash
Land & Building
50,000
40,000
Furnitures
9,000
600
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
depreciation
70,000
45,000
21,000
4,000
Machinary and Equipment
100,000
34,000
58,000
8,000
Lorry
80,000
50,000
25,000
5,000
Forklif
130,000
105,000
23,000
2,000
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
61,128
58,128
3,000
672,408
469,708
van
Working Capital
10,000
5,400
3,000
2 months
Administrative
Marketing
TOTAL
Existing F.
Assets
10%
132,400
70,300
Total =
RM672408
 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
5
5
5
FIXED ASSETS
Machinary and Equipment
Lorry
Forklif
Econ. Life (yrs)
5
5
5
5
5
5
Fixed Asset
Furnitures
Cost (RM)
9,000
Method
Straight Line
Economic Life (yrs)
5
Annual
Accumulated
Year
Depreciation
Depreciation
1
1,800
1,800
2
1,800
3,600
3
1,800
5,400
4
1,800
7,200
5
1,800
9,000
6
0
0
7
0
0
8
0
0
9
0
0
10
0
0
Book Value
9,000
7,200
5,400
3,600
1,800
-
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
Loan
Hire-Purchase
Fixed Assets
Own Contribution
Existing F. Assets
Cash
Land & Building
50,000
35,000
Furnitures
9,000
600
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
8,000
Lorry
80,000
50,000
25,000
5,000
Forklif
130,000
105,000
23,000
2,000
20,000
15,000
5,000
4,500
3,300
1,200
Operations
Pre-Operations & Other
Expenditure
85,726
75,726
15,050
Loan
9,050
Contingencies
61,128
58,128
672,404
464,704
van
Machinary and Equipment
Working Capital
2
Marketing
TOTAL
5,400
3,000
months
Administrative
10%
15,000
Hire
Purchase
10,000
132,400
75,300
6,000
3,000
ABC Construction
LOAN & HIRE-PURCHASE AMMORTISATION SCHEDULES
LOAN REPAYMENT SCHEDULE
Amount
464,704
Interest Rate
10%
Duration (yrs)
Method
5
Baki Tahunan
RM464704
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
464,704
Total Payment
-
-
Principal
Balance
132,400
1
92,941
46,470
139,411
371,763
1
16,550
6,620
23,170
115,850
2
92,941
37,176
130,117
278,822
2
16,550
6,620
23,170
99,300
3
92,941
27,882
120,823
185,881
3
16,550
6,620
23,170
82,750
4
92,941
18,588
111,529
92,941
4
16,550
6,620
23,170
66,200
5
92,941
9,294
102,235
-
5
16,550
6,620
23,170
49,650
6
0
0
-
-
6
16,550
6,620
23,170
33,100
7
0
0
-
-
7
16,550
6,620
23,170
16,550
8
0
0
-
-
8
16,550
6,620
23,170
-
9
0
0
-
-
9
0
0
-
-
10
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
 1st 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
ToTal Year 2
74,520
Total Year 3
89,424
OPERATIONS EXPENDITURE
Fixed Assets
RM
PURCHASE PROJECTION
Month 1
9,000
Machinary and Equipment
100,000
Month 2
10,000
Lorry
80,000
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
Forklif
130,000
Working Capital
Raw Materials & Packaging
Carriage Inward & Duty
9,000
Salaries, EPF & SOCSO
3,363
petrol/diesel
500
Other Expenditure
Other Expenditure
Pra-Operasi
Deposit (rent, utilities, etc.)
Business Registration & Licences
Insurance & Road Tax for Motor
Vehicle
1,000
Other Expenditure
1,350
TOTAL
325,613
400
Total Year 1
162,000
ToTal 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
PreOperations
20%
1
2
3
4
5
6
7
2,520
2,800
3,360
3,360
3,360
4,200
4,200
720
1,160
1,360
1,440
1,440
1,680
3,520
4,520
4,720
4,800
5,640
5,880
CASH INFLOW
Capital (Cash)
Loan
75,300
398,704
Cash Sales
Collection of Accounts
Receivable
TOTAL CASH INFLOW
474,004
2,520
10% + 20%(of the 2nd month sales)
CASH PAYMENTS FOR PURCHASES
In the month of purchase
80%
1 month after purchase
20%
assume
2 months after purchase
Total
100%
80%
20%
Operations Expenditure
Cash Purchase
Payment of Account Payable
7,200
8,000
9,600
9,600
9,600
1,800
2,000
2,400
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’, 1st Ed. Prentice Hall.
Malaysia