CHAPTER FIVE

FINANCIAL PLAN

5.0 Introduction

A financial plan involves the analysis of short term as well as long term projections of money

flow to and from the business. Financial planning is necessary in a business in order to verify the

viability of business to yield profits. It also ensures appropriate allocation on all business

function and reduces wastage and misappropriation.

For the venture to start operations, a total of Ksh 1,100,000 will be required as the opening

capital for the business and will be sourced as shown below.

A table on pre-operational expenses:

MONEY SOURCE AMOUNT

Personal Savings 600,000 Ksh
Kcb Bank 250,000 Ksh
Co-operative bank 250,000 Ksh
Total 1,100,000 Ksh

5.1 Pre-operational Cost

These are expenses to be incurred by the enterprise in preparation for the commencement of

business operation. Classic and Elegant dry cleaners incurred the following pre-operational

expenses:

ITEMS AMOUNT(Ksh)
Market Survey (Research) 20,000
License and Permits 15,000
Insurance 120,000
Tools and Equipment’s 580,000
 Advertising 20,000
TOTAL 755,000

5.2 Working Capital Requirement

Working capital is excess of Current Assets less the Current Liabilities. This is the money that

circulates during the everyday usage of the application. It assists the business to be able to meet

its debts from its own resources.

Working Capital = Total Assets – Current Liabilities

755,000 – 200,000

= Ksh 550,000

5.3Cash flow projections

Item jan Feb mar apr may jun jul aug sep oct nov dec
Balance 20,000 100,00 170,000 150,00 230,000 90,000 120,000 160,000 160,00 230,000 330,00 390,00
brought
forward 0 0 0 0
Transition 50,000 40,000 10,000 50,000 10,000 50,000 40,000 50,000 40,000 70,000 40,000 60,000

s
Loan 50,000 50,000 50,000 - - 50,000 50,000 40,000 70,000 20,000 50,000 40,000
Debtors 100,000 80,000 40,000 80,000 - 20,000 70,000 50,000 - 80,000 90,000 50,000
Creditors 30,000 50,000 - 70,000 - 30,000 - 10,000 80,000 50,00 - 100,000
Total 250,000 320,00 270,000 350,00 240,000 240,00 280,000 310,000 350,00 450,000 510,00 640,000

0 0 0 0
Permits 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Creditors 30,000 30,000 - - 30,000 - - 30,000 - - - 30,000
Wages 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Rent 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Transport 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Total 150,000 150,00 120,000 120,00 150,000 120,00 120,000 150,000 120,00 120,000 120,00 150,000

0 0 0 0 0
Net cash 100,000 170,00 150,000 230,00 90,000 120,00 160,000 160,000 230,00 330,00 390,00 490,00

flow 0 0 0 0

5.4 Pro-forma Balance sheet

Balance sheet is a statement of account that shows the financial stability of a business. It

indicates the business assets, liabilities and capital at a specific trading period.

SMP APLLICATION
BALANCE SHEET
AS AT 31ST DECEMBER, 2021
ASSETS LIABILITIES

CURRENT ASSETS CURRENT LIABILITIES

Cash in Bank 500,000 Creditors 100,000

Cash at hand
100,000 Taxation 20,000
Debtors 30,000.00
       
TOTALS 630,000   120,000
LONG TERM
FIXED ASSETS   LIABILITIES  
Tools and Equipment
580,000 Outstanding loan 500,000
Deappresistion 50,000

   
TOTALS 630,000   500,000
5.5. BREAK EVEN ANALYSIS

It is also called the cost volume. Profit analysis is a financial tool to determine the cost to be

incurred as well as sales to be made for a business to neither make a profit nor loss, but recover

the total costs.

Gross profit = ksh 490,000

Profit margin= 490,000 *100

640,000

76.6%

5.6 DESIRED FINANCING

The total desire financing is all the amount needed by the business in order to run smoothly

without running to huge amount of loses in the venture

The venture needs around Ksh 1,100,000 to start and run the business smoothly.