Co-operative Finance for newcomers Ian Rothwell Co-operative & Community Finance

1. Co-operative Finance for newcomers Ian Rothwell Co-operative & Community Finance Growing your co-operative – 11 November 2011

2. Objectives for today • Demystify finance • Introduce some key financial documents • Look at how to apply for finance “Whoever said money can't buy happiness simply didn't know where to go shopping.” Bo Derek

3. Co-operative Finance for newcomers • Book keeping • Profit & loss • Cashflow • Balance sheets • Management accounts • Business Plan • Applying for a loan “Money isn’t everything but it sure keeps you in touch with your children” J. Paul Getty

4. Book-keeping • help you manage and grow your co-op • to comply with tax requirements

5. Money in Fromsales, grants, loans etc Objective: Get the money into the bank account as soon as possible without losing any of it on the way. Money out The payment ofbills for supplies, wages, overheads, loan repayments, tax, NI etc Objective: Ensure that the right amount is paid at the right time to the right people.

6. Income

7. Expenditure

8. The profit and loss account • Shows total revenue generated less total expenses incurred in generating that revenue. • Excludes capital receipts or payments. • The figures do not include VAT. • Two calculations of profit: • Gross profit: total amount of profit on all sales and any otherincome after deduction of the direct costs of buying or making the stock that was sold. • Net profit: the net figure after the other costs (the Overheads) have been deducted from the Gross profit.

10. The profit and loss account

11. The cash flow forecast • An analysis of the money that will flow in and out, where it will come from where it willgo and when • Calculations must include: • All income into the business, including sales (with VAT), loans, grants etc. • All payments including to suppliers, for overhead,NI, PAYE tax, VAT and Corporation tax.

12. The cash flow forecast

13. The balance sheet • A balance sheet sets out the financial position of the business at a particular point in time. • It is a snapshot of the business’ overall worth. • Shows how the business is funded • How the funds are being used. • Shows the assets and the claims against the business. • It can provide useful insights into the financial position. • e.g. Liquidity. The ability of the business to meet its short-term obligations from its liquid (cash or near-cash) assets. • Low liquidity may present a problem.

14. The balance sheet “There are men who can write poetry, and there are men who can read balance sheets. The men who can read balance sheets cannot write.“ • Henry R Luce

15. Management accounts • Financial statements to help you • Understand your trading position • Make informed decisions • Usually prepared monthly or quarterly • A book-keeper will provide Management accounts information to your specification.

17. Profit • Not for profit, social profit, non profit distributing • A viable and sustainable co-op • Reserves • If something goes wrong • For future/planned investment • What to do with any surplus? “Profits, like sausages... are esteemed most by those who know least about what goes into them.” Alvin Toffler

18. Business Plan • Useful for you • Essential for investor • Useful for people joining the co-op • Shared Goals

19. What the Business Plan could include • Aims • Objectives • History and context • People • Current activities • Development Plan • SWOT/PESTLE Analysis • Market Analysis • Marketing • Operations • Financial information

20. What do lenders want? LENDERS WANT TO GET REPAID!!

21. Co-operative or mutual structure or social structure Co-operative & commercial viability Social &/or environmental contribution Ability to repay What do we look for when Lending?

22. Memorandum & Articles/Rules Is it a co-operative? Membership and People Why is it a co-op? History and Development New start or established business? Premises Freehold, lease rental?

23. Equipment Purchase, hire, lease, new, old? The Product/Service - Market and Marketing Is there a gap in the market, is there a market in the gap? Finance and Financial Projections How much is required and where from? When is it viable?

24. Areas of Concern • Management • Financial control • Membership levels & Ownership • Decision making • Trading levels • Sustainability

25. The loan’s approved – now what happens? (1) Loan offer and/or agreements issued (2) If security is involved, solicitors instructed (3) Preconditions need to be satisfied before funds drawn (4) Once drawn, maintain repayments and provide management information (5) If you hit problems, or you see them coming, talk to us

26. Loan term - 2 months - 10 years+. Loan amounts - £5,000 - £75,000. Packages up to £150,000 Interest rates competitive (6-10%) collar/fixed/facility Small Appraisal fee. No other charges Prepayment charge We Offer…

27. Funded by The Co-operative Group, Midcounties, East of England & Chelmsford Star Co-operatives http:/www.co-operativeloanfund.coop www.co-operative.coop/enterprisehub Contact Ian Rothwell www.coopfinance.coop info@coopfinance.coop Brunswick Court, Brunswick Square Bristol BS2 8PE Tel: 0117 916 6750