ideas to numbers .. simple financial projections
The opening day capital balance forms part of the opening balance sheet of the business. Capital represents cash and cash equivalents introduced by the owners of the business.
The capital opening balance is recorded in the balance sheet of a business under its own heading of capital and together with retained earnings, forms part of the owners equity in the business.
The opening day debt balance forms part of the opening balance sheet of the business. Debts are amounts which are owed by the business to providers of debt finance sometimes referred to as lenders.
Debts include many types of finance including loan, borrowings, mortgages, credit cards and generally any form of finance which involves the payment of interest.
The opening day accounts payable balance forms part of the opening balance sheet of the business. Accounts payable are amounts which are owed by the business to its suppliers, they are sometimes referred to as trade creditors.
If a supplier allows a business credit and invoices it for a product or service and payment is made at a later date 30 days 60 days etc, then while the business owes the supplier the money it are classified as an accounts payable in the accounts of the business.
The opening day accounts payable balance forms part of the opening balance sheet of the business. Accounts payable are amounts which are owed by the business to its suppliers, they are sometimes referred to as trade creditors.
If a supplier allows a business credit and invoices it for a product or service and payment is made at a later date 30 days 60 days etc, then while the business owes the supplier the money it are classified as an accounts payable in the accounts of the business.
The opening day accounts receivable balance forms part of the opening balance sheet of the business. Accounts receivable are amounts which are owed to you by your customers, they are sometimes referred to as trade debtors.
When you allow your customer credit and invoice them for a product or service and receive payment at a later date 30 days 60 days etc, then while they owe you the money they are classified as an accounts receivable.
The opening day cash balance forms part of the opening balance sheet of the business, and includes amounts which are held by a business in the form of notes and coins (e.g. petty cash) or which are held at a bank in the form of on demand deposits such as current accounts and savings accounts.
The cash opening balance comes under the heading of current assets in the balance sheet of the business.
The opening day fixed assets form part of the opening balance sheet of the business, and include such items as, land, buildings, plant & machinery, fixtures & fittings, and motor vehicles.
Fixed assets are assets which have a long life and are for use within the business and not held for resale. They are not part of the trading stock, and are not involved in the day to day working capital cycle of the business so are not readily convertible into cash.
Fixed assets are sometimes referred to as long term assets or capital assets.
Startup costs need to be funded through a combination of capital injected by the owners and investors, supplier credit and debt finance. This can be seen from our start up costs calculator which shows startup expenses and assets on the left hand side matched by the startup funding on the right hand side.
It is unlikely in a startup business that suppliers will grant substantial credit terms before the business has started trading, so having estimated the amount of startup capital available, it is possible to calculate the balance that will need to be funded by debt finance, such as startup business loans.
Having estimated the startup costs of the business for the financial projection, it is now necessary to consider how these costs are going to be funded. Funding can be provided either by way of capital or debt.
Startup capital is the amount of cash injected into the business by the founders and the investors to help fund the start up costs. Any startup costs not funded by capital investment will need to be funded by debt and borrowings.
In return for injecting the startup capital, the owners and investors receive a percentage of the equity of the business, and make a return on their investment either by way of capital appreciation when the business is sold, or by way of dividends paid out by the business.
Small business startup assets are the costs which you need to spend to get the new business up and running, ready to start producing and selling goods and services.
They include expenditure on capital items such as land, buildings, equipment, plant and machinery, and inventory needed to get the business open for trade.
Small business startup expenses are the costs which you need to spend to get the new business up and running, ready to start producing and selling goods and services.
What you define as startup expenses is completely a matter of opinion. Some costs are clearly one off startup expenses for example legal fees to obtain a lease on new premises. Other costs are not so well defined, for example initial printing and stationary costs might be defined as startup expenses, but at some point printing and stationery becomes a normal day to day trading expense.
