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  • Trading Terms Explained

    Financial Information - Why do I need it?

    Listed below are some simplified financial terms with a brief explanation.

    Cash Flow Statement
    This is a calendar that shows when CASH comes in and out of your business
    It helps calculate how much money is needed to start and run the business
    The impact of seasonal ups and downs can easily be seen
    A smart way to work out how much borrowing you need
    Above all, it shows the bank that you can repay the loan
      • Cash inflow: Cash received by the business
      • Cash outflow: Cash paid out by the business
    Profit and Loss (P&L)
    It shows how much PROFIT your business is making
      • "Profit is not Cash" and "Cash is not Profit"
    The only figure you'll be taxed on is the net profit - know it

    • Sales/Turnover: Total amount invoiced in the period of goods and services supplied by the business
    • The Cost of Sales: All materials and expenses directly relating to the provision of the goods and services included in the sales period
    • Gross Profit: Sales less cost of goods sold i.e the amount generated by the business available to fund running cost and overheads
    • Gross Margin: Gross profit as a percentage of sales
    • Overheads: Operating expenses that cannot be directly allocated to producing the goods or services for sale
    • Depreciation: The amount by which the book value of a fixed asset has fallen during the period
    • Net Profit: The amount retained by the business after all expenses and overheads have been deducted
    Balance Sheet
    This will show your ability to repay any short-term debts
    It reflects your assets and liabilities
    • Asset: Anything of Value that the business owns or is owed
    • Stock: Raw materials, work in progress and goods ready for sale
    • Debtor: Someone who owes money, goods or services to the business
    • Creditor: Someone the business owes money, goods or services
    • Liability: Money, goods or services owed by a business
    Calculating your sales forecast
    This is a practical way to see how many sales you'll need 

    Calculating breakeven & profit
    Use this tool to learn how to calculate your break-even sales
    It describes how discounts can have an impact on your profit
    It will show the positive impact of price increase on your profit

    Daily sales needed
    A table which shows how many sales you'll need per day, week or month

    Personal spending budget
    Works out how much you need to take out of the business to live on

    If there are any words still unclear to you, spend some time to find out the meaning.

    Would you like to download a cash flow forecast template?  If yes <<click here>>

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