BSBFIM601 Manage Finances

BSBFIM601

Manage finances

OVERVIEW- BUSINESS EXAMPLE

 I am starting the Business of Internet Advertisement

Service which will support clients for posting their

advertisement on the website such as Face book, Google

Ad, Seek.com and Gumtree.com.au instead of them.

 We will distribute the client’s advertisements to the so

many websites.

 So we need to research and prepare revenue, expenditure

and capital investment proposals for a business or strategic

opportunity.

OPPORTUNITIES AND OBJECTIVES

 Opportunities  According to our research, some retailers or shop owners want to

advertise their service on the Internet.

 Besides, the people want to customize their advertisement for local people.

 The People want to announce any updates using Social Network Service as well.

 But, in Australia, there are not many companies which can support local customized advertisement services.

 Objectives  Research how much we need to spend money on start-up capital.

 Consider overheads including rent, wages, stocks and etc.

 Come up with new business model for clients who want to advertise their business on the Internet.

 Identify performance measures and tactics for monitoring and control process.

 Estimate the other finance statements such as profit and loss, cash flow and etc.

OPPORTUNITIES TO SPECIAL PROJECTS

 According to our research and the opportunities, so many

people want to advertise their business and service on the

Internet.

 However in Australia it is not easy to find any proper

company which supports the business people.

 Although some large companies such as Google or eBay

support an Internet advertisement service, they only have

a public advertisement strategy for any people.

 So, we are going to make a new business model which

supports an Internet advertisement but, it will be very

specialized and customized for local people.

FINANCIAL TRENDS AND OBJECTIVES(1)

• Financial Trends

•Before business starting, we have researched financial trends, which

describe how the trends have moved

from offline advertisement to online

advertisement, and come up with more

reality objectives based on those

financial trend data.

•So, according to some researched data

which is conducted Online advertising in

New Zealand 2011, online ad spend will

increase its share of the total ad spend

market from its current position of 12 per

cent to 19 per cent by the end of 2013.

FINANCIAL TRENDS AND OBJECTIVES(2)

 The chart below shows Total online advertising spend in

the fourth quarter of 2011 was $87.11m, up 20.52 per cent

year on year. Display advertising in the same quarter was

$27.03m – its biggest quarter to date. Both email and

online video spend increased throughout 2011:

 Email advertising increased from $0.24m to $0.61m

 Online video increased from $1.90m to $2.64m.

FINANCIAL TRENDS AND OBJECTIVES(3)

 The graph below is meant as mobile marketing spend is on

the rise. Forrester research announces mobile advertising

in the U.S. will become a billion-dollar business for the first

time in 2011. And between 2011 and 2014, the market will

more than double in size, topping $2.5 billion.

FINANCIAL TRENDS AND OBJECTIVES(4)

 Objectives

 According to the above data, which show the internet advertisement

industries have been grown gradually from 2009 to 2014, Internet

marketing and advertisement are valuable to promote as a new

business, because the business still growing and mobile marketing,

which is combined with Internet infrastructure, is required for people.

Therefore, the business plan could be focused on internet, mobile and

social media as the objectives below.

 Business Preparation : Internet advertisement and Trends research,

Mobile advertisement and Trends research, Social advertisement and

Trends research

 Internet Advertisement Service :Banner Advertisement Service, Web

Search Advertisement Service, Email marketing

 Mobile Advertisement Service : Mobile Banner Advertisement Service,

Mobile Web Search Advertisement Service, Mobile Application for

Promotion

 Social Media Advertisement Service : Face Book Advertisement

Service, Twitter Advertisement Service, YouTube Advertisement

Service

FINANCIAL PLANNING, TIMEFRAMES AND

RESOURCES(1)

 Financial Planning  Allocation expenses and resources for financial planning must be setup, but it is

an initial stage, which means the items can be not correct or need to be revised.

Start-up Expenses Legal $1,000.00

Stationery, etc. $2,500.00

Employment $15,000.00

Promotion $5,000.00

Insurance $250.00

Rent $500.00

Research and Development $1,000.00

Expensed Equipment $3,500.00

Other $5,000.00

Total Start-up Expense $33,750.00

Start-up Assets Needed Cash Balance on Starting Date $494,000.00

Other Short-term Assets $5,000.00

Total Short-term Assets $499,000.00

Long-term Assets $0.00 Total Assets $499,000.00

Total Requirements $532,750.00

FINANCIAL PLANNING, TIMEFRAMES AND

RESOURCES(2)

 Timeframes

 First of all, the business planning must be defined

clearly, and then some of people will be hired for web

site development, business service implementation,

Marketing and Sales.

Activity Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7

Business

Planning

Employment

Web Site

development

Business Service

Implementation

Promotional

Campaign

Review the

activities

Start Internet AD

service

Start Mobile AD

service

Start Social

Media AD service

INDIVIDUALS OR GROUP ARE GIVEN

RESPONSIBILITY FOR THE DEVELOPMENT

 Chief Technical Officer

 This position needs work experience including engineering, programming and sales.

 Online User Experience and Marketing

 This position is required with experience in the interactive space, specializing in online

branding, marketing, and user experience design.

 Marketing and Communications

 Marketing and Communications roles want the right person who has experience in sales,

employee communications, public relations, interactive communications and technology

marketing.

 Advisor

 Advisor can be described as a person is expertise in Business Administration in Management

Science and Computer Information Systems.

Position or Role Men Months

Chief Technical Officer 1

Online User Experience and Marketing 1

Marketing and Communications 1

Development and Technical Service in IT area 3

Sales and Consulting 2

Advisor 1

* The salary will follow the market rate in Australia.

ANALYSIS WITH PAST EXPERIENCES,

PRESENT TRENDS AND FUTURE

EXPECTATIONS FOR PROPOSAL(1)

 Analysis

 As an example below for that we are processing business plan, this chart shows the growth of online

advertisement revenue and the simultaneous decline of newspaper advertising in the United States.

 The Interactive Advertising Bureau announced that online advertising revenue in the United States was up 14

per cent in the first half of 2012, hitting a new record of $17 billion. Online ad revenue has been rising steadily

for more than ten years now, only dipping once in the wake of the financial crisis in 2009. Naturally, the rise of

online advertising comes at the expense of other media, with newspapers arguably being the worst affected.

Radio is also in a fight for advertising survival.

 Bob Pittman, born Jackson, MS., founder MTV and AOL executive is un-retiring to lead Clear Channel’s attempt

to recapture market.

ANALYSIS WITH PAST EXPERIENCES,

PRESENT TRENDS AND FUTURE

EXPECTATIONS FOR PROPOSAL(2)

 Proposal

 Offline advertisement business will be decreased due to

less preference than online advertising which have been

getting more populated with changed IT infrastructure

such as faster Internet speed, Smart phone and tablet

PC.

 This IT environment makes it possible to appear an

advertisement as photo, music and movie, but not only

text.

 As a result, these factors could convert simple text

adverting to a variety of types for advertisement.

 So it can be suggested that using many types of media

for advertising.

PROPOSAL LINKED OBJECTIVES

 The suggested proposal ideas could be matched

into the each objective.

 These proposal items and advertisement types

will be chosen based on people requirements and

different preferences.

Advertisement Types

Proposal Items Internet Mobile Social Media

eMail O O

Image O O

Video O O O

Instant Message O

Music O

Mobile App O

Web Search O O O

COST BENEFIT AND RISK ANALYSES(1)

 Cost-benefit analysis

 In the beginning, the development will cost $80,000 to setup every business

parts and infrastructure excluded employees, and it will lead people to an

efficient business flow.

 After one year, it will expect that maintenance costs will be paid for employees,

facilities and the other expenses.

 However, the benefits of advertising and marketing services from clients will

highly make profits over $120,000.

Cost-benefit Analysis

Cost Year

0 1 2

Development Costs -$80,000

Maintenance Costs -$75, 000 -$82,500

Total Costs -$80,000 -$75, 000 -$82,500

Present Value of Costs -$80,000 -$65,217 -$62,382

Cumulative PV Costs -$80,000 -$115,217 -$177,599

Benefits

Benefits from advertising service $110,000 $121,000

Benefits from marketing service $10,000 $11,000

Total Benefits $120,000 $132,000

COST BENEFIT AND RISK ANALYSES(2)

 Risk Analyses

 There are many different types of business risk. Risks can be

internal and external to business. Some risks can also directly

or indirectly affect the business's ability to operate.

 Risks can be hazard-based (e.g. chemical spills), uncertainty-

based (e.g. natural disasters) or associated with opportunities

(e.g. taking them up or ignoring them). The Australian

standard defines risk as 'the chance of something happening

that will have an impact on objectives'. The table below

represents some of the main risk issues for common business

parts.

 Thus, those issues must be considered in the middle of

business planning.

COST BENEFIT AND RISK ANALYSES(3)

Issues Description Level Cost

Legal and ethical obligations Compliance with all relevant statutes,

regulations and audit requirements of the

organisation, along with the organisation's

policies and values

High and Critical Less than

$5,000

Legislation, codes and national

standards relevant to the workplace

Relevant legislation from all levels of

government that affects business operation,

especially in regard to Occupational Health and

Safety and environmental issues, equal

opportunity, industrial relations and anti-

discrimination

High and Critical Less than

$5,000

OHS considerations OHS legislative requirements and address

organisational OHS objectives

Medium and

Moderate

Less than

$3,500

Property and Equipment Damage from natural disasters, burst water

pipes, robbery and vandalism

Low and Minor More than

$6,500

Security Theft, fraud, loss of intellectual property,

terrorism, extortion and online security and

fraud

High, but

Moderate

Less than

$4,000

Economic and Financial Global financial events, interest rate increases,

cash flow shortages, customers not paying,

rapid growth and rising costs

Low and

Moderate

N/A

INVESTMENT TARGET RATES AND CAPITAL

EXPENDITURE PROPOSALS(1)

 Investment Target Rate

 Investment target rates refer to the minimum percentage rate

of return required by the organisation for a capital investment

project to proceed. Thus, this table shows the minimum rate

and range of investment targets.

 Our business belongs to IT Service area, so some Investment

Targets such as Employment and Research and Development

will be focused more than others.

Investment Target Rate (Range)

Legal 10% (10-25%)

Employment 25% (25-25%)

Facility Expenses 15% (15-35%)

Research and Development 25% (25-30%)

Maintenance 15% (15-15%)

Risk Management 10% (10-15%)

INVESTMENT TARGET RATES AND CAPITAL

EXPENDITURE PROPOSALS(2)

 Capital Expenditure

 In order to implement the Internet Advertisement Business Service and launch strategy, we are seeking an initial seed investment of $150,000.

 An additional investment of $1 million will be required for operational expenses, continuing marketing campaigns, additional website enhancements, maintenance and support as necessary to establish and maintain Internet Advertising for customers.

 As detailed in the Cash Balance chart for one year, our business will be able to begin and sustain its operations with the above mentioned investments.

 We are confident the opportunities in the market place are so compelling that with year one cash flows, and our business will grow and take advantage of the growth in the Internet Advertisement Service.

INVESTMENT TARGET RATES AND CAPITAL

EXPENDITURE PROPOSALS(3) Start-up Funding

Start-up Expenses to Fund $57,685

Start-up Assets to Fund $157,315

Total Funding Required $215,000

Assets

Non-cash Assets from Start-up $155,000

Cash Requirements from Start-up $2,315

Additional Cash Raised $0

Cash Balance on Starting Date $2,315

Total Assets $157,315

Liabilities and Capital

Liabilities

Current Borrowing $5,000

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $0

Other Current Liabilities (interest-free) $0

Total Liabilities $5,000

Capital

Planned Investment

Web Service Development $50,000

General Customer Service and Technical Service Development $5,000

Research Online User Experience and Marketing $2,500

Employment for Advisor Positions $2,500

Additional Investment Requested $150,000

Additional Investment Requirement $0

Total Planned Investment $210,000

Loss at Start-up (Start-up Expenses) ($57,685)

Total Capital $152,315

Total Capital and Liabilities $157,315

Total Funding $215,000

PERFORMANCE MEASURES  Getting on top of financial measures of performance is an important part

of running a growing business, and it will be much easier to invest and

manage for growth.

 Thus, normally, key performance indicators (KPIs) should be prepared on

a regular and consistent basis and compared with prior periods.

Monitoring performance using successive monthly or quarterly accounts

can show trends that otherwise might not be apparent.

 The following are some important KPIs that should be monitored:

KPI Description

Stock turnover Reflects the number of days that it takes to sell inventory. The lower the ratio means the quicker the

stock is sold.

Debtors turnover Reflects average length of time from sale to cash collection. The lower the ratio means the quicker

that accounts are paid. From a cash flow perspective, it is important to keep days outstanding to a

minimum.

Current ratio Indicates the extent to which current assets cover current liabilities and is a measure of the ability to

meet short-term obligations. The rough rule of thumb is a ratio of 2:1. That is for every $1 of liabilities

(within 12 months), there should be at least $2 in current assets to meet such liabilities.

Debt/equity This is a measure of the extent to which a business relies on external borrowings to fund its on-going

operations. The higher the ratio, the more heavily that debt financing is used. In order to provide a

reliable measure, assets should be valued at market value.

Interest coverage Provides a measure of the ability of the business to meet its interest commitments out of profits and is

linked to the debt/equity ratio. The rough rule of thumb used by banks is a ratio of 3:1. That is,

operating profit before income tax exceeding interest expense three times.

Return on investment Represents the after-tax return that owners are receiving on their investment and should be

compared with alternative forms of investment.

Gross profit margin An indication of the profitability of the business and reflects control over cost of sales and pricing

policies. This ratio should be compared with prior periods and to any available industry data.

Breakeven sales Reflects the sales that need to be generated in order to cover expenses. In other words, this is the

level of activity at which neither a profit nor loss is incurred, nor where total costs equate with total

revenue. This is a very important ratio that every owner should monitor on a monthly basis.

OBLIGATION WITH ORGANISATIONS VALUES,

POLICIES AND CODE OF CONDUCT

 Some Legal and Ethical must be considered, before starting

business. So, we need to consult some organizations such as

Advertising Federation of Australia, Internet Censorship Laws in

Australia, Australian Competition and Consumer Commission.

 Legal and ethical obligations

Businesses should make it imperative that its officers,

directors and employees act at all times in an honest and

ethical manner in connection with their service to that

particular company.

 Legislation, codes and national standards relevant to the

workplace

These parts are relevant legislation from all levels of

government that affects business operation, especially in

regard to Occupational Health and Safety and environmental

issues, equal opportunity, industrial relations and anti-

discrimination.

OBLIGATION WITH ORGANISATIONS VALUES,

POLICIES AND CODE OF CONDUCT

 OHS considerations

Occupational safety and health is an area concerned with

protecting the safety, health and welfare of people engaged in

work or employment. The goals of occupational safety and

health programs include to foster a safe and healthy work

environment.

 Advertising Federation of Australia

The Advertising Federation of Australia is the peak body

representing companies in advertising and marketing

communications to industry, government, media and the

public. They monitor and help influence government and

industry policy on issues affecting members’ businesses. The

AFA represents advertising agencies to unions in areas such

as talent and TV production.

OBLIGATION WITH ORGANISATIONS VALUES,

POLICIES AND CODE OF CONDUCT

 Internet Censorship Laws in Australia

Internet censorship in Australia currently consists of a regulatory

regime under which the Australian Communications and Media

Authority (ACMA) has the power to enforce content restrictions on

Internet content hosted within Australia, and maintain a "black-

list" of overseas websites which is then provided for use in filtering

software. The restrictions focus primarily on child pornography,

sexual violence, and other illegal activities, compiled as a result of a

consumer complaints process.

 Australian Competition and Consumer Commission

The Australian Competition and Consumer Commission (ACCC) is

an independent authority of the Australia government. It was

established in 1995 with the amalgamation of the Australian Trade

Practices Commission (TPC) and the Prices Surveillance Authority

to administer the Trade Practices Act 1974 (TPA) (Cth) (renamed

the Competition and Consumer Act 2010 on 1 January 2011). Its

mandate is to protect consumer rights, business rights and

obligations, perform industry regulation and price monitoring and

prevent illegal anti-competitive behaviour