Cash Flow (Pro Forma statement)

1. Cash Flow (Pro Forma statement) Financial Planning

2. Financial statement • Cash flow pro forma statement • Income statement • Balance sheet Usually prepare for 3 years projection

3. Project Implementation cost • 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

4. Project Implementation cost • 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

5. Pre operation expenditure • Expenses for : • Legal fee • Company registration • License fee • Expertise services • Feasibility studies • Insurance • etc

6. Working Capital(Modal Pusingan) • 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

7. Contigencies • To overcome • increases in material price • Miscalculation during preparing the project implementation cost • Usually 5 – 10% from project cost

8. Expenditure

9. Administrative expenditure • Salary • Fee • Accounting • Bank charge • Maintenance and repair • Electric, water and telephone • Insurance • Rental • Legal fees • Post & stamp • Printing & stationary • Staff training • travelling

10. Marketing expenditure • Promotion • 1% of total sales • Example: • Sales projection = 283,880 • Promotion expenditure = 2840 • Delivery • 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

12. depreciation Total = RM672408

13. Depreciation schedule • For every fixed assets excluding land • Methods: • Straight line methods • Declining balance

15. 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

16. Source of finance

17. Loan

18. Hire purchase

19. Loan Hire Purchase

20. 464704 x 10% 92941+46470 RM464704 5 years 464704-92941

21. Pro forma statement

22. 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)

23. Monthly basis

25. assume

26. 70% 20% 10% + 20%(of the 2nd month sales)

27. assume 80% 20%

28. tax

29. tax • 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

30. KWSP

31. kwsp • employer contribute 12% • employee contribute 11% From the employee salary

32. reference • Wahab, I.A.,Ibrahim, M.D., Ahmad, F. (2002)‘Rancangan Kewangan Perniagaan Kecil dan Sederhana’, 1st Ed. Prentice Hall. Malaysia