BSBESB303: Organize finances for new business ventures Assessment Answer

Course: TAFE

Assessment Type: Practical

Starting a new business can be an exciting but intimidating prospect. One of the most important things to do before you launch your product or service is to have it financially sound- this assessment will help identify what areas need more attention in order for success.

This assessment will require you to use the financial documents of two fictional businesses- a hairdressing salon and a bicycle shop. You will need to analyze each business’ assets, liabilities, expenses, and income in order to make recommendations for improvement.

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In this section, we are describing some activities. These are:

Assessment Activity 1: Prepare to organize finances for a new business venture

If you are considering starting a new business venture, it is important to prepare for the next step in ownership. This means organizing finances and creating budgets for your company. The first thing that needs to be done before anything else is setting up an LLC or limited liability corporation.

This will protect the owner from any financial risks associated with running the company if they decide not to take on the personal responsibility for any debts incurred by their company. Once this has been completed, it’s time to set up a budget so that there are no surprises when balancing out accounts at the end of each month.

One of the most important things to remember when budgeting is that unexpected expenses always seem to come up. This can be anything from a broken window in the shop to an illness that keeps you from working for a few weeks. Be sure to account for these types of costs when creating your budget and have a cushion saved away so that you’re not caught off guard.

1. Establish current financial situation, showing funds available and commitments already incurred

When starting a new business venture, it is important to have an understanding of the current financial situation. This includes what funds are available to put into the business and any commitments that have already been made.

For example, if you have already borrowed money from family or friends to use for the business, you will need to include that amount in your calculations. It is also important to be aware of any contracts or agreements that have been made with other businesses or individuals.

This information will help in making decisions about the future of the company and what types of expenses can be incurred. For example, if you are starting a new hairdressing salon, you will need to lease a space and purchase any necessary equipment.

In order to set up a budget, you will need to have a better understanding of the company’s current financial situation is.

2. Identify equity finance and assets from available sources

When starting a new business endeavor, it is important to identify equity finance and any available assets from sources other than the company itself. This will help provide funds for equipment and supplies needed to get started.

According to the SBA Office of Advocacy – “Equity financing generally occurs when a business owner uses personal funds or invests in his or her business in return for equity in the company”

It is important to understand that when dealing with personal funds, there are tax consequences. For example, if you invest $20,000 into a new business venture and received 15 percent of the business in return, then your initial investment is considered taxable income. This type of money needs to be accounted for when creating a budget.

On the other hand, when looking at assets from outside of the company, it is important to remember that they come with a cost. This could be in the form of a loan that needs to be repaid with interest or a mortgage on a property that has been purchased.

3. Identify business mix and forecast expected business activity over a year

Once you have a better understanding of the company’s current financial situation and any available equity finance and assets, it’s time to forecast expected business activity over a year. You will also need to identify the company mix by identifying the products or services that are being offered.

This will help determine how profitable your new business venture can be after all expenses have been accounted for. For example, if you are starting a new restaurant, you will need to factor in the cost of food, labor, and rent. However, this type of business generally has a higher profit margin than other types of businesses.

On the other hand, if you are starting a new online store, you will need to account for the cost of inventory, shipping, and website design. This type of business generally has a lower profit margin than other businesses.

Once you have a good understanding of the company’s financial situation, available equity finance and assets, and expected business activity over a year, it is time to start creating the budget. This will include the estimated cost of starting the business and monthly expenses that are expected to be incurred.

Assessment Activity 2: Determine required finances for a new business venture

When starting a new business venture, it is important to have a realistic understanding of the amount of money that will be required to get started. This includes the cost of start-up expenses and monthly expenses that are expected to be incurred.

There are a number of resources available to help with this process, such as the Small Business Administration (SBA) or your local Chamber of Commerce. They can typically provide information on the average cost of starting a business in your industry.

In addition, it is important to remember that not all businesses are created equal. The amount of money required to start a new business will vary depending on the type of business you are starting. For example, the monthly rent expense for a storefront is different than the monthly cost of renting cloud storage space.

Regardless of whether you are starting your own business or looking to invest in someone else’s business, it is important to fully understand what’s required before making any financial commitments. This will prevent potential losses due to unforeseen circumstances that could happen after investing in a new business venture.

1. Estimate start-up costs for business venture according to established business activities

Now that you have a general idea of the amount of money that will be required to start a new business venture, it’s time to estimate the start-up costs. This includes the cost of start-up expenses and monthly expenses that are expected to be incurred.

Again, there are a number of resources available to help with this process. You can use the Small Business Administration or your local Chamber of Commerce to find information on the average cost of starting a business in your industry.

2. Estimate income and expenses for the first year of operation

Once you have a better understanding of the cost of start-up expenses and monthly expenses, it’s time to estimate income and expenses for the first year of operation. This will help determine how profitable your new business venture can be after all expenses have been accounted for.

This is also an important step in the process because it helps determine whether or not it is realistic to expect your business to be profitable after expenses are paid. For example, if you’re starting a new restaurant, the monthly cost of rent will be much higher than the expected income from customers during that same time period.

3. Project cash flow for the first year of operation

The final step in the process is to project cash flow for the first year of operation. This will help determine how much money you expect your business to make after all expenses have been accounted for.

This is also an important step in the process because it helps determine whether or not it is realistic to expect your business to generate a profit. For example, if you are starting a new food truck, the monthly cost of rent will be much higher than the expected income from customers during that same time period.

The budgeting process involves creating a breakdown of all projected expenses and revenues based on activity figures obtained in previous steps. The following is an example of how this might look for a startup business in the food industry:

Ideally, the expenses in your budget should be specific to your business. For example, instead of including markup for general sales tax, you would include markup for local city sales tax. This will allow you to more accurately track which line items are affecting your profitability and spending levels.

4. Seek specialist financial advice as required according to workplace procedures

Even with a well-constructed budget, it’s always a good idea to seek specialist financial advice when starting a new business venture. This is especially true if your budget is complex or contains unusual line items.

Specialist financial advisors can help you understand how specific expenses and revenues will impact your overall business finances. They can also provide valuable insights on potential tax breaks or other financial assistance that may be available to you.

When seeking specialist financial advice, always make sure to follow your workplace procedures for doing so. This will help ensure that any confidential information is kept safe and secure.

5. Record cash flow and budget and required finances

Once you have a final budget that is complete and accurate, it’s time to record all of the relevant cash flow information. This will help determine if your business has enough capital to cover its monthly expenses.

This process should be part of your overall accounting system to ensure that budgets are updated regularly throughout the fiscal year or quarterly at a minimum. The key benefit to keeping your budget up to date is that you will be able to track actual revenues and expenses much easier than if the information isn’t readily available.

If your business doesn’t have enough cash on hand to cover its monthly expenses, it’s important that these problems are identified immediately. This will help ensure that your business doesn’t risk closing its doors too soon.

Having enough capital on hand will also be important if your business wants to expand or invest in additional assets. This is especially true for small businesses that are just getting started and may not be able to raise the necessary funds through traditional lending sources.

Many business owners don’t realize that they can begin building capital reserves long before they even open their doors for business. Having enough capital on hand to cover at least six months of expenses is a good rule of thumb for new businesses, and it can be achieved by saving a portion of your income each month.

Assessment Activity 3: Plan to access finances for a new business venture

If you are considering starting a new business venture, one of the first things you should do is assess your expected access to capital. This will help determine whether or not you have enough money on hand to cover the startup costs involved with getting your business up and running.

There are a number of ways to access the necessary finances for a new business venture. The most common methods include:

• Saving money from your current income
• Applying for a small business loan
• Receiving financial backing from family or friends
• Seeking angel investors or venture capitalists

Each of these methods has its own set of pros and cons, so it’s important to weigh the options carefully before making a final decision.

If you are able to save money from your current income, this can be a great way to reduce the amount of debt you will need to incur during the startup phase. However, it may take some time to save up enough money to cover all of your expenses.

1. Investigate and source suitable types of finances

If you decide to apply for a small business loan, it’s important to do your research and find a lender that offers the best terms for your particular situation. It’s also important to have a solid business plan in place so that the lender knows you are a good risk.

Receiving financial backing from family or friends can be a great way to get your business started, but it can also be risky if things don’t go well. It’s important to have a clear understanding of the expectations from both sides before agreeing to any financial arrangements.

Angel investors and venture capitalists can be a great source of capital for businesses that have a solid track record and a high potential for growth. However, it’s important to be aware that both types of investors will want a sizable share of the equity in your company.

2. Establish methods of accessing finances and servicing any repayment schedule

Once you have decided on a method of accessing finances for your new business venture, you need to establish a plan for servicing any repayment schedule. This will ensure that you don’t fall behind on your payments and put your business at risk.

If you are able to save money from your current income, this can be a great way to reduce the amount of debt you will need to incur during the startup phase. However, it may take some time to save up enough money to cover all of your expenses.

3. Complete required documentation

Regardless of the method you choose for accessing finances for your new business venture, it’s important to complete all of the required documentation. This will help ensure that the process goes as smoothly as possible and that you don’t encounter any unexpected delays.

It’s also a good idea to keep track of all of your expenses related to the startup phase so that you have a clear idea of your cash flow situation. This will help you better manage your money and plan for any future expenses related to the business.

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