To launch a new project or expanding the current business a significant amount of financing is required. Without financing the business or any project cannot become successful. The financing of the project is considered one of the most important parts of the project management because through successful financing the business tries to complete its project and meet the needs of the project efficiently. In this project just like any other project, a significant amount of financing is required so that Mr. Amari can perform the activities of the project efficiently and can deliver the project on time. If all the expenses and current financing of Mr. Amari are analyzed then it can be said that Mr. Amari currently has enough financing to perform the project efficiently.

Table of contents

Executive summary. 2

Introduction. 3

Analysis. 3

Expenses related to future speak on activities. 3

Fixed costs. 3

Variable costs. 4

One off costs. 4

Recurrent costs. 4

Cost directly related to products. 5

Cost indirectly related to products. 5

Does Mr. Amari have sufficient financing or Not 5

Impact of alternative scenarios on financing requirements. 7

Cost modification impact on financing needs. 8

Strengths & weaknesses of Mr. Amari’s project 8

Conclusion. 9

References

Introduction

This report aims to provide brief information regarding the budgeting techniques and how budgets can be prepared to meet the financing needs of the project. In this report, the project of Speak-on is discussed in detail. The financing requirement of the project is analyses critically in the project.

Analysis
QUESTION 1
Expenses related to future speak on activities
Fixed costs

The fixed costs are those costs that do not change with the change in the production process. Usually, the fixed cost in the business includes wages, rent and other expenses. In the speak on the project, the fixed costs include the interest payment which has to pay on the line of credit. The interest rate is fixed at 8%. Another fixed cost is the banking fee which will be charged monthly. The insurance installments are also fixed expenses (Warren, Reeve, & Duchac, 2016).

 

Variable costs

The costs associated with the inventory ate going to be variable cost because the amount of inventory keeps on changing with time. if the number of inventory increases due to an increase in sales than the cost associated with inventory will also increase as a result however if the amount of sales decreases due to any reason than the cost associated with inventory will also decrease. It means that the inventory-related costs keep ion changing over time. The costs incurred in performing the sales or cost of goods sold also changes from time to time because of changes in the sales amount.

 

One-off costs

Mr. Amari will consider different costs as one-off costs. The one-off costs are such costs that occurred only once. For the development of the logo, the services of the Logo Joy website have been taken. The services fee for the website will be paid only once. For website development, the GoDaddy website charges a one-time fee for domain name changes. Therefore these are some of the costs which will be incurred only once by the project. In the future, if Mr. Amari considers doing something new then other one-off costs can also be incurred (Warren, Reeve, & Duchac, 2016).

 

Recurrent costs

In the speak on the project, many costs can be explained as recurrent costs. Such costs include the monthly payments of the services which are taken from different websites such as GoDaddy and Canva. The insurance amount he also going to be paid in installments every month. The interest on the line of credit has to pay monthly as well. The inventory costs and the cost of goods sold are all such costs which will occur again and again. The recurrent costs are mainly those costs that are important for running the business efficiently (Spender, 2014).

Cost directly related to products

The logo and website development cost and the cost associated with sales are such costs that are directly related to products. These are such costs that are related to the product and helps the product in its sales and performing the business in increasing the quality of the services given to the target customers.

 

Cost indirectly related to products

The banking and insurance cost and the cost associated with inventory are such costs that are indirectly related to products. These are such costs that are not related to the product but helps the product in its sales and performing the business efficiently.

 

 

logo fee	87
canva subscription	14
business card cost	60
website design	633
domain name fee	10
membership fee	5
card design	60
business registration	68
insurance	138
banking fee	20

QUESTION 2

Does Mr. Amari have sufficient financing or Not

To launch a new project or expanding the current business a significant amount of financing is required. Without financing the business or any project cannot become successful. The financing of the project is considered one of the most important parts of the project management because through successful financing the business tries to complete its project and meet the needs of the project efficiently. In this project just like any other project, a significant amount of financing is required so that Mr. Amari can perform the activities of the project efficiently and can deliver the project on time (Campbel, Edgar, & Stonehouse, 2011).

If all the expenses and current financing of Mr. Amari are analyzed then it can be said that Mr. Amari currently has enough financing to perform the project efficiently. Currently, Mr. Amari has $12,000 in financing for the project. $10,000 has been taken as credit from the financial institution and $1500 is the amount of grant. Mr. Amari has also invested $500 from its savings as well. The expenses which are going to be incurred in the project are less than the amount of financing currently Mr. Amari has; therefore it can be said that Mr. Amari has a sufficient amount of financing (Warren, Reeve, & Duchac, 2016).

If all the initial expenses are analyzed then it can be said that those expenses can be easily covered with the amount of financing Mr. Amari has for they speak on the game. However further financing might be required only if the business experience an increase and the sales of the project increasing dramatically in the upcoming period. In the current scenario, the business has enough resources from which the activities of the project can be performed accurately. In the upcoming period, the expenses and sales of the business will experience growth (Warren, Reeve, & Duchac, 2016).

Table 1: Cash Budget

Cash Budget
particulars
cash inflows	sep	oct	nov	dec	Jan	Feb	mar	apr	may	jun	July	aug
grant	1500	_	_	_	_	_	_	_	_	_	_	_
personal savings	500	_	_	_	_	_	_	_	_	_	_	_
sales		_	_	200	200		200		500	900	100	100
line of credit			10,000
total cash inflows	2000	1598	11,433	10895	9734	8867	6852	6215	6113	5659	5273	4854
cash outflows
logo fee	87
canva subscription	14	14	14	14	14	14	14	14	14	14	14	14
business card cost		60
website design			633
domain name fee	10
membership fee	5	5	5	5	5	5	5	5	5	5	5	5
card design	60	20	20	20	20	20	20	20	20	20	20	20
business registration	68
insurance	138	46	46	46	46	46	46	46	46	46	46	46
banking fee	20	20	20	20	20	20	20	20	20	20	20	20
inventory cost				400		1400			800
interest				856	763	709	532	497	449	381	414	380
total cash outflow	402	165	738	1361	868	2214	637	602	1354	486	519	485
net balance	1598	1433	10695	9534	8867	6652	6215	5613	4759	5173	4754	4369

QUESTION NO. 3

Impact of alternative scenarios on financing requirements

The increase in the sales will require the project to enhance its financing because when the sales of the business increase the expenses of the business also increase as a result. The increased expenses will require more financing so that business operations can be performed efficiently. The inventory cost will increase significantly if the amount of sales increases from the projected amount. Overall it can be said that the increasing costs have a significant impact on the financing needs and the business will have to acquire more financing for meeting these needs (Campbel, Edgar, & Stonehouse, 2011).

Table 2: Cash Budget with Early Sales Estimation

Cash Budget
particulars
cash inflows	sep	oct	nov	dec	Jan	Feb	mar	apr	may	jun	July	aug
grant	1500	_	_	_	_	_	_	_	_	_	_	_
personal savings	500	_	_	_	_	_	_	_	_	_	_	_
sales	200	200	200	200	200		200		500	900	100	100
line of credit			10,000
total cash inflows	2200	1823	11,638	11100	9923	9040	7012	6362	6248	5783	5388	4960
cash outflows
logo fee	87
canva subscription	14	14	14	14	14	14	14	14	14	14	14	14
business card cost		80
website design			633
domain name fee	10
membership fee	5	5	5	5	5	5	5	5	5	5	5	5
card design	60	20	20	20	20	20	20	20	20	20	20	20
business registration	68
insurance	138	46	46	46	46	46	46	46	46	46	46	46
banknig fee	20	20	20	20	20	20	20	20	20	20	20	20
inventory cost	175			400		1400			800
interest				872	778	723	545	509	460	391	423	389
total cash outflow	577	185	738	1377	883	2228	650	614	1365	496	528	494
net balance	1623	1638	10900	9723	9040	6812	6362	5748	4883	5288	4860	4466

 

The decline in the sales will not require the project to enhance its financing because when the sales of the business decrease the expenses of the business also decrease as a result. The decreased expenses will not require more financing so that business operations can be performed efficiently (Kourdi, 2015). The inventory cost will decrease significantly if the amount of sales decreases from the projected amount. Overall it can be said that the decreasing costs have a significant impact on the financing needs and the business will not have to acquire more financing for meeting these needs (Pandey, 2015).

 

Table 3: Cash Budget with Decline in Sales

Cash Budget
particulars
cash inflows	sep	oct	nov	dec	Jan	Feb	mar	apr	may	jun	July	aug
grant	1500	_	_	_	_	_	_	_	_	_	_	_
personal savings	500	_	_	_	_	_	_	_	_	_	_	_
sales		_	_	100	100		100		250	450	50	50
line of credit			10,000
total cash inflows	2000	1598	11,433	10795	9534	8675	7276	6597	6214	5682	5208	4741
cash outflows
logo fee	87
canva subscription	14	14	14	14	14	14	14	14	14	14	14	14
business card cost		60
website design			633
domain name fee	10
membership fee	5	5	5	5	5	5	5	5	5	5	5	5
card design	60	20	20	20	20	20	20	20	20	20	20	20
business registration	68
insurance	138	46	46	46	46	46	46	46	46	46	46	46
banknig fee	20	20	20	20	20	20	20	20	20	20	20	20
inventory cost				400		700			400
interest				856	755	694	574	528	477	419	413	375
total cash outflow	402	165	738	1361	860	1499	679	633	982	524	518	480
net balance	1598	1433	10695	9434	8675	7176	6597	5964	5232	5158	4691	4260

The two selected scenarios regarding this case are presented below:

Increase in Sales
	Dec	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug
Meetings per month	20	10	0	10	0	25	25	5	5
Sales Conversion Rate	40%	30%		40%		50%	45%	45%	50%
Sales	8	3	0	4	0	12.5	11.25	2.25	2.5
Decrease in Sales
	Dec	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug
Meetings per month	20	10	0	10	0	25	25	5	5
Sales Conversion Rate	10%	25%		25%		30%	40%	35%	30%
Sales	2	2.5	0	2.5	0	7.5	10	1.75	1.5

 

The above stated table represent financial outcomes of two scenarios: the one in which sales decreases for the business in the selected time duration. The second scenario is about the increase of sales in the same time. In case sales increase, owner would be able to meet his obligations easily. While decrease in sales will cause issues for him to meet the line of credit requirements.

Surge Cost:

In case, company increases its sales price in response to higher market demand then company will have the following financial outcomes (at $35/u of sales). Surging price will have probability for them to meet the requirement of bank (fee around $20/month) after subtracting all direct and indirect costs. 

Surge	$35
	Dec	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug
Meetings per month	20	10	0	10	0	25	25	5	5
Sales Conversion Rate	40%	30%		40%		50%	45%	45%	50%
Sales	8	3	0	4	0	12.5	11.25	2.25	2.5
	$280	$105	$0	$140	$0	$438	$394	$79	$88

Diminishing Cost:  

Diminishing cost will have decrease in sales and per unit sales price for the business. The following table represent diminishing cost that will reduce the potential to pay bank fee regarding line of credit. See the following table.

DIMINISHING	$15
	Dec	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug
Meetings per month	20	10	0	10	0	25	25	5	5
Sales Conversion Rate	10%	25%		25%		30%	40%	35%	30%
Sales	2	2.5	0	2.5	0	7.5	10	1.75	1.5
	30	37.5	0	37.5	0	112.5	150	26.25	22.5

Cost modification impact on financing needs

As discussed earlier the cost changes have a significant impact on the project. When the costs of the projects increase more financing is required and if the cost of the project declines than less amount of financing adequate for the project (Chandra, 2011).

QUESTION NO. 4
Strengths & weaknesses of Mr. Amari’s project

The cash budget of the project shows that Mr. Amari has a huge opportunity to generate a significant amount of sales. If the sales of the project increases than the business have a huge opportunity to generate a significant amount of profit. Managing the costs efficiently will be a great challenge for Mr. Amari and can affect the overall profitability. The following are key strengths and weaknesses of the Mr. Amari’s project:

Strengths:

·         The business has a vast targeted market in the educational sector approximately 700 private schools.

·         The business is capable to meet its 50% target in the introduction stage which is a positive factor for future growth.

·         Overhead cost and indirect cost is lower therefore business would easily produce higher profit margin.

Weaknesses:

·         In the introduction stage, company was unable to meet the sales forecast.

·         Company ordered excessive inventory then requirement.

Considering the assessment outcomes and business analysis it can be concluded that Speak on is relatively safe business investment opportunity for Mr. Amari. In case, business succeed  to manage expected sales then company would be able to achieve high profitability margins. Although, they would also need to control unnecessary costs associated with operations. Considering analysis, he should go ahead and launch himself in this business to accomplish future goals regarding profitability of business. He should go ahead instead of continuing study on entrepreneurial plans.

Conclusion

It is concluded that the increase in the sales will require the project to enhance its financing because when the sales of the business increase the expenses of the business also increase as a result. The increased expenses will require more financing so that business operations can be performed efficiently. The inventory cost will increase significantly if the amount of sales increases from the projected amount. The decline in the sales will not require the project to enhance its financing because when the sales of the business decrease the expenses of the business also decrease as a result. The decreased expenses will not require more financing so that business operations can be performed efficiently.

References

Campbel, D., Edgar, D., & Stonehouse, G. (2011). Business Strategy: An Introduction. Macmillan International Higher Education.

Chandra, P. (2011). Financial Management. Tata McGraw-Hill Education.

Kourdi, J. (2015). The Economist: Business Strategy 3rd edition: A guide to effective decision-making. Profile Books.

Pandey, I. (2015). Financial Management. Vikas Publishing House.

Spender, J.-C. (2014). Business Strategy: Managing Uncertainty, Opportunity, and Enterprise. OUP Oxford.

Warren, C., Reeve, J. M., & Duchac, J. (2016). Financial & Managerial Accounting. Cengage Learning.