Accounting Business Reporting for Decision Making

CHAPTER 1 Introduction to accounting and business decision making 37

• Organisational structure and staffing. Who will do which jobs in the business? If there will be more

staff than just the owner–operator, who else will be employed? What skills and qualifications do they

need? How will the firm recruit staff and at what rate of pay? What further training will staff need?

If possible, include an organisational chart for the firm.

• Professional advisers. Provide the names and contact details of all the outside business and technical

advisers the business expects to use. This may include an accountant, a bank manager, an insurance

broker and management consultants.

• Insurance and security needs. What insurance will be required for the business and how much will it

cost? Are there any special security precautions that need to be considered for the business’s property

and equipment?

• Business premises. Discuss and explain all the issues related to location. Where  will the business be

based? How accessible is this to customers? Is it convenient to local roads and transport services? If

the proposed site is to be leased, what rent, lease period, payments and conditions apply? Are any

special facilities required (that is, does the business need a certain building size, specialised customer

access, special lighting, air-conditioning or rest rooms)?

• Plant and equipment required. What equipment does the business need? Provide a list of likely needs,

along with the type and make, cost, life expectancy, running costs, and service and maintenance

requirements.

• Production processes. Briefly explain how the product is made, including the supply of any raw mat-

erials or trading stock, production processes in the premises and any related issues.

• Information and communication technologies. Describe the extent to which ICT will support people

and processes within the business from an operational standpoint. This typically focuses on technol-

ogies that will be used to enhance productivity and/or enable consistency and quality.

• Critical risks and contingency plans. All businesses face potential problems and threats that can derail

the goals outlined in the business plan, or possibly even destroy the organisation. Although not all of

these can be identified in advance, major threats should be discussed here, along with strategies for

dealing with such issues if they arise.

Financial projections

In this section, the financial documents are presented, along with background notes and information that

help a reader make sense of the financial forecasts.

• Basic assumptions and information
  
  
  • Explain the assumptions made in estimating income and expenses, and in calculating the various
    figures. Justify any unusual items, significant omissions or unusual variations in the figures. What
    estimates have been made about inflation or increases in costs, wages and interest rates?
  
  
  • It may be useful to provide details about the bank accounts that the business operates. What finan-
    cial institution are these with, what type of accounts are they (savings, cheque or cash manage-
    ment), and what fees are charged? Does the financial institution have the facilities that the business
    might need, e.g. credit card access, mobile credit card scanners and online banking?
  
  
  • Does the business currently have any loans or overdrafts outstanding? Provide details about the
    lender, the amount borrowed, the current balance still outstanding and the terms of the loan.
  
  
  • If additional funds are needed by the business, how much and how are they to be raised? If this
    money is to be borrowed, provide information about the proposed lender, total amount sought, date
    required, monthly repayments due, interest rate, loan conditions and term (duration) of the loan.
  
  
  
  


• Financial forecasts
  
  
  • Sales mix forecast. Use market research and/or past performance to determine likely sales revenue
    for the first 12 months. Estimate the number of items sold each month, sales income from these and
    cost of goods sold.
  
  
  • Cash flow forecast. A cash flow statement summarises the monthly amount of cash movements
    (cash inflows and cash outflows) and the resulting cash balance for a year.