Assignment 2: Business Plan Breakdown 4—The Operations Plan for HR Cloud Technology

The Simplified Financial Plan: HR CLOUD Technology

Argosy University

February 6, 2019

The Simplified Financial Plan

The success of HR Technology cloud implementation is heavily dependent on capital requirements. The start-up requirements will obviously be higher than the subsequent use the project. First, funds will be required in the development of the centralized HR cloud technology which is expected to be sold to the different firms in the consumer goods industry. The cost for the system development is estimated to be $150,000. The cost also includes testing of the system to ensure it is working as required. Other than the development of the software, the project would also incur costs in adverts that will lead to firms adopting the system for their daily use. The project aims at using $25,000 for adverts and finally incur an expense of $20,000 for training the different firms on how to effectively use the software. The initial trainings are expected to be free, as it will serve as a way of market penetration bearing the product will still be new to the market. In total, the project is, therefore, expected to cost a total of $195,000 with an additional $5,000 for miscellaneous hence making it a total of $200,000.

Identify the sources of financing

As a result of starting cost being high, various sources of finance were considered. The first source is personal savings; from a personal perspective, I intend to have a strong stake in the project, with my personal savings providing half of the entire budget needed kick off the project. Fundraising through friends and families will be another major source of finance for the project (Burns, & Dewhurst, 2016). . Bank loans will also be considered as a possible source of funding for the project. Finally, if the finances will not be enough, investors, who will have a stake in the project will act as the third major source of finance.

Define a Payback Period

Payback period refers to the time needed for an investment to fully recover the original outlay with regards to savings or profits. In this case, for instance, payback would be the time in which this HR Cloud technology investment would recover the $200,000 initially invested as profits or savings.

Prepare Cash Flow Projections

The following cash flow projections consider the first quarter of the operation phase, and it assumes that the software has been developed with the initial marketing also conducted.

	Jan	Feb	Mar	Apr	Total
Cash Inflow
Sales	5,000	6,000	8,000	10,000	29,000
Cash Outflows
Marketing	2,000	2,000	1,000	1,000	6,000
Training	500	500	500	500	2000
Total Outflows	2500	2500	1500	1500	8000
Net Cash Flow	2500	3500	6500	8500	21000

Within the first four months, the project is expected to have a positive net cash flow $21,000, with the sale of the HR cloud technology software expected to rise in the course of the year.

Projected Balance Sheet

	Balance Sheet, December 31, 2019
Assets			Liabilities
Cash (current)	20000		Accrued Expenses (current)	50000
Software (long-term)	100000		Bank Loan (long-term	50000
			Common Stock	20000
Total Assets	120,000		Total Liabilities	120,000

Above is the projected balance sheet for the year 2019, thus showing the company’s financial health by the end of the year.

Income Statement Projections

Income Statement, for the year end December 31, 2019
Revenues
Total monthly Software Subscription	170000
Total		170000
Expenses
Wage expense	15000
Marketing and adverts	30000
Rent	500
Training	20000
Software updates	25500
Total Expenses		91000
Net Income		79000

The above income statement shows the project’s expected revenue and the different expenses that will be incurred during the year. In the end, the project is expected to gain a net profit of $79000.

Break-Even Analysis

Break-even analysis is used in finding out the point at which a business neither makes a loss of a profit (Kaplan & Atkinson, 2015). It takes into account fixed and variable costs, which are compared with sales revenue.

Ratio Analysis

Various ratios could be used in the determination of financial health of the company. Net sales to working capital ratio, for instance, is used in determining how efficient the project will use the working capital. It is obtained by dividing net sales by the working capital.

Working capital turnover = sales/working =250000/200000 = 1.25

Current ratio shows the ability of the business to pay its long-term and short-term obligation (Vogel, 2014).  It is obtained by dividing the current assets by current liabilities.

Current ration = Current assets/current liabilities = 20000/50000 = 0.4

Possible Risks Associated with the Implementation and Future Operation

There are various risks associated with the HR cloud technology with regards to its implementation and the future operation. First, being a software of its own kind in the industry, there is likelihood that it could be termed as ambiguous in terms of its usage. Ambiguity could not, however, be of major significance as it only takes a matter of time before the users fully understand how to use the technology. Secondly, there is the threat of quick evolving technology (Sanders & Kelly, 2008). There is a possibility of the technology becoming obsolete with time as a result of new inventions, which could make this technology outdated. This risk is of outmost significance as it could to the fall of the project. If the technology does not focus on new updates and improvements, it could become of no major help to the users. The project involves software development which could be affected by viruses, hence affecting its usage. This is a significant issue as it could play a role in chasing away potential clients for the product. The issue must thus be solved to ensure it does not become a hindrance to marketing and customer loyalty.

References

Burns, P., & Dewhurst, J. (Eds.). (2016). Small business and entrepreneurship. Macmillan International Higher Education.

Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.

Sanders, R., & Kelly, D. (2008). Dealing with risk in scientific software development. IEEE software, 25(4).

Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis. Cambridge University Press.