Business Management Techniques

Assignment 3

Analyse the key functions of financial planning and control

By Steve Goddard

Business Management Techniques

Assignment 2

Select and Apply Costing Systems and Techniques

Business Management Techniques

Manage Work Activities to Achieve Organisational Objectives

By Steve Goddard

Acknowledgements

David Sullivan – Supplier of lecture resources.

Mike Tooley & Lloyd Dingle – For there book on higher national engineering.

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Table of Contents

Section Description Page1 Task 1 72 Task 2 13- References 16

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Task 1 – Identify and describe appropriate Financial Planning Processes. Looking at short medium and long term plans, strategic plans; operational

plans; financial objectives and organisational strategy.

Financial Planning Processes

Short Plans

Short-term financial decisions differ from long-term financial decisions in two important ways. First, they are

easily reversed in most cases. Second, there is far less uncertainty about the decision variables as you are

concerned with the next few months rather than years. This does not mean that short-term financial decisions are

any less important. Short-term financial decisions ensure the firm's liquidity and are critical to the short-term

survival of the business.

Firms finance their operations from short-term and long-term sources. Although short-term financial decisions

almost always involve short-lived assets, there is a linkage between short-term and long-term financing decisions

arising from a firm's cumulative capital requirements. If you have a surplus of long-term financing, you would

need less short-term funds. Ordinarily, financial managers try to match the maturity of capital sources with the life

of the assets funded by them. For example, some minimum level of working capital is needed permanently in the

business and is financed from permanent sources, whereas the seasonal increase in working capital typically is

financed from short-term sources.

The primary short-term funding sources are loans from commercial banks and direct market borrowing through

commercial paper issues. Commercial banks provide different types of loans and lines of credit and remain a

major source of funding for corporations, though their market share has decreased significantly in the last two

decades.

Example of a short term financial plan which shows a bank loan:

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Strategic Plans

Business Angels

Business angels are wealthy individuals who invest in start-up and growth companies in return for equity in the

company. The investment can involve both time and money depending upon the investor.

Typically business angels have already made their fortune through other business ventures, possibly their own

start-up or a career in business. Most are men aged between 45 and 65. However, investors can be younger –

particularly in the technology sector.

Business angels can operate independently, but many work as a syndicate.  This is because 40% of all angel

investments are lost. Only the top 20% achieve more than a 50% return. To avoid losing a lot of money on one

big deal, an investor needs to make a number of investments and spread the risk.

The British Business Angels Association (BBAA) estimates that business angels invest roughly £300 million

every year. BBAA research has indicated that business angels invest more in early stage businesses than formal

Venture Capital Funds.

The term business angel covers a wide range of individuals investing varying amounts of money at different

stages of business development. In general there are six different types of investor:

Virgin. Has not yet invested

Latent. Has not invested in the past three years

Wealth maximising. Experienced businessmen and women investing for financial gain

Entrepreneur. Backs businesses as an alternative to stock market investments

Income seeking. Invest for income or to gain a job

Corporate. Companies that make regular investments,

often for majority stakes.

Business angels are a vital tool used to fill the gap between

venture capital and debt finance – particularly for start-up and

early stage companies.

They also provide a useful source of equity finance – where the

investor takes a stake in the company in return for a cash

injection – for relatively small amounts that would not otherwise

be available through venture capital.

Investments can be anywhere between £10,000 and £250,000

although in practice most investments are in the region of

£25,000. In addition to a first investment, business angels often

follow up with later rounds of financing for the same company.

As well as cash, business angels can offer years of experience

in the business world. Although some prefer to become a

sleeping partner, others will get actively involved in your

business from writing a marketing plan to taking the company

through a flotation on the stock market.

One of the most common faces of business angels would be the TV show Dragons Den in the picture above.

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Venture Capitalists

Venture capital is also known as private equity finance. Unlike business angels, venture capitalists (VCs) look to

invest large sums of money in return for equity in - ie a share in the ownership of - your business.

VCs typically invest in businesses with:

a minimum investment need of around £2 million, though many smaller regional VC organisations may

invest from £50,000

an ambitious but realistic business plan

a product or service that offers a unique selling point or other competitive advantage

a large earning potential and a high return on investment within a specific timeframe, eg five years

sound management expertise - although VCs tend not to get involved in the day-to-day running of the

business, they often help with a business' strategy

a proven track record - for this reason, VC's generally do not consider start-ups for investment

The advantages of securing a VC are that they can provide large sums of equity finance and may bring a wealth

of expertise to your business. Also, if you successfully attract a VC to your business, you're likely to find it easier

to secure further funding from other sources.

The disadvantage is that securing a deal with a VC can be a long and complex process. You'll be required to

draw up a detailed business plan, including financial projections for which you're likely to need professional help.

Support from your local Business Link may be available for this. Also, if you get through to the deal negotiation

stage, you'll have to pay legal and accounting fees, whether or not you're successful in securing funds.

There are several VC associations. The following are two of the best established:

The British Private Equity and Venture Capital Association (BVCA) - the BVCA helps larger businesses

locate venture capital companies. 

The European Private Equity and Venture Capital Association (EVCA) - this organisation provides

information and networking opportunities for investors, entrepreneurs and policymakers in the equity

finance industry.

Mortgages

A commercial mortgage is probably the best way to finance the purchase of buildings and land for business

purposes, it provides the most flexible and affordable finance solution.

Commercial mortgages are specialised due to the fact that the lender has a legal claim over the property until the

loan has been repaid in full.

Mortgage loans of this type are tailor made for purchasing any commercial property used for business purposes

including shops, factories, offices and warehouses. Commercial mortgages can also be used for taking over an

existing business, purchasing a brand new building or buying land.

Although they often come with higher interest rates and more variables than residential mortgages, commercial

mortgages are more flexible and can carry extra incentives for borrowers. With commercial mortgages, the lender

has a legal claim over the property until the loan has been fully repaid.

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Benefits

A commercial mortgage provides your business with a major asset that is likely to increase in value and offers a

wide range of additional benefits. These include:

← The opportunity to consolidate expensive short-term finance

← The ability to raise money for working capital or an injection of cash flow

← A reduction in the costs of an existing commercial mortgage

← An opportunity to increase your earning potential through refurbishing, improving or expanding your

business property

← Avoidance of exposure to just one lending source for both business banking and property investment

← Mortgage repayments may be similar to rental payments - therefore no need to budget for additional

property expenditure or any increase in rent

← The interest on a commercial mortgage is tax-deductible

Disadvantages

A commercial mortgage is a long-term commitment and, similar to a residential mortgage, will need to be paid off

over a period of 15 years or more.

However, it is vital to ensure all repayments are made on time. Failure to so will accrue additional interest and, if

you continue to default on payments, can lead to your property being repossessed and a poor credit status.

Loans

Business loans are commonly used by business owners to access cash needed for business start up, growth or

improvement. There are a wide variety of programs and lenders available, so it’s important to understand your

specific needs and pursue a loan that fits your situation.

A business loan is a financial tool available to business owners of all sizes who need funding to enhance their

business. Small businesses and start-up businesses typically have a more difficult time securing a business loan,

but it is certainly not impossible. Regardless of your business size, any lender you work with will want to see firm

documentation that supports the viability of the business as well as the purpose for the loan.

Business loans can be used for many things. Some common uses include start up costs, expansion of the

business, capital investments, and refinancing of business debt. Most business owners will pursue a business

loan at some point because it is common to need additional funds at various stages of business development.

Banks are a common source of business loans, but they are often more conservative in their lending decisions.

For this reason a bank is much more likely to underwrite a loan to a larger or more established business. It’s not

impossible to get a loan from a traditional bank if you’re smaller or just starting up, but you will usually need to

provide more extensive documentation of your business plans.

There are many other sources of business loans in the UK, so do some research on other lending sources. There

are lenders and angel investors that specialize in small or start up loans, as well as venture capitalists seeking

larger investment opportunities. Additionally, there are several government programs designed to assist business

owners with securing a business loan.

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Production Plans

Overdraft

An overdraft is a borrowing facility attached to your bank account, set at an agreed limit. It can be drawn upon at

any time and is ideal for your day-to-day expenses, particularly to see you through cash flow problems.

It is worth noting that loans are probably more appropriate for long-term funding. An overdraft is likely to cost

more than a loan for a long-term purchase.

Advantages

An overdraft is flexible - you borrow what you need at the time which may make it cheaper than a loan.

You only pay for the funds you use.

It's quick to arrange.

There is not normally a charge for paying off the overdraft earlier than expected.

Disadvantages

If you have to extend your overdraft, you usually have to pay an arrangement fee.

Your bank could charge you if you exceed your overdraft limit without authorisation.

The bank has the right to ask for repayment of your overdraft amount at any time.

Overdrafts may be secured against business assets - the lender can take control of these if you don't

repay the overdraft.

Unlike loans you can only get an overdraft from the bank where you maintain your current account. In

order to get an overdraft elsewhere you need to transfer your business bank account.

The interest rate applied is nearly always variable, making it difficult to accurately calculate your

borrowing costs.

Credit Cards

A small business credit card will provide the necessary support for the outgoings of your company. It is a fact of

life that sometimes your outgoings will exceed immediate available funds, so it is a good idea to be prepared for

this event. UK Credit cards for small businesses come with protection from fraud, so you will not be charged for

improper use – as long as the issuer is notified of the theft quickly.

The potential benefits of having a small business credit card are considerable; it can help with various areas of

running your business, from booking travel arrangements to paying for advance mass shipments of products

from wholesalers. Credit cards for small businesses can also prove to be invaluable when unexpected

investment opportunities arise and you need fast access to funds. Not all, but some banks require you to have a

current account open with them before you can be eligible for a small business credit card.

One of the great things about small business credit cards is that it is fairly easy to add supplementary card

holders to your business account. This can be very useful in minimising the to-and-froing of money within the

business, but some banks charge for the privilege so check this first if you think it will become necessary.

Giving other members of staff access to your small business account can significantly reduce the amount of time

spent interpreting where the money has been spent. Many issuers put the infrastructure in place to allow you to

manage and track such activity and the benefits of this service will increase as your small business expands.

This does not diminish the control you have over the funds of your business as you can allocate spending limits

to card holder’s individually, and track their expenditure in detail.

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Discounts and Rewards

By taking out a small business credit card; your company will benefit from similar treatment as some of the

longer-established businesses in operation. By using your small business credit card you can expect to receive

discounts off certain products and services as well as cover for all account card holders for things like travel

insurance. Check individual issuers for specific details.

Some credit cards for small businesses have a system in place which rewards you according to how much you

spend on the account. This is particularly beneficial if every card holder is included on the programme. Further

features can include deals with telecom companies for every member of staff, in order that they can keep in

touch in a more cost-effective manner.

Charge Cards

Charge cards are an appealing option as you can often get up to 2 months of interest free credit-card purchases

if you keep up to date with payments. A charge card also doesn’t have a pre-set limit on spending, allowing your

business the flexibility it might need.

Retained Profit

Retained profits are when a business makes a profit and it does

not spend it, it keeps it - and accountants call profits that are kept

and not spent retained profits. That's all.

The retained profit is then available to use within the business to

help with buying new machinery, vehicles, computers and so on or

developing the business in any other way. Retained profits are

also kept if the owners think that they may have difficulties in the

future so they save them for a rainy day!

Trade Credit

For many businesses, trade credit is an essential tool for financing growth. Trade credit is the credit extended to

you by suppliers who let you buy now and pay later. Any time you take delivery of materials, equipment or other

valuables without paying cash on the spot, you're using trade credit.

When you're first starting your business, however, suppliers most likely aren't going to offer you trade credit.

They're going to want to make every order c.o.d. (cash or check on delivery) or paid by credit card in advance

until you've established that you can pay your bills on time. While this is a fairly normal practice, you can still try

and negotiate trade credit with suppliers. One of the things that will help you in these negotiations is a properly

prepared financial plan.

When you visit your supplier to set up your order during your start-up period, ask to speak directly to the owner of

the business if it's a small company. If it's a larger business, ask to speak to the CFO or any other person who

approves credit. Introduce yourself. Show the officer the financial plan you've prepared. Tell the owner or

financial officer about your business, and explain that you need to get your first orders on credit in order to launch

your venture.

Depending on the terms available from your suppliers, the cost of trade credit can be quite high. For example,

assume you make a purchase from a supplier who decides to extend credit to you. The terms the supplier offers

you are two-percent cash discount with 10 days and a net date of 30 days. Essentially, the supplier is saying that

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if you pay within 10 days, the purchase price will be discounted by two percent. On the other hand, by forfeiting

the two-percent discount, you're able to use your money for 20 more days. On an annualized basis, this is

actually costing you 36 percent of the total cost of the items you are purchasing from this supplier! (360 ( 20 days

= 18 times per year without discount; 18 ( 2 percent discount = 36 percent discount missed.)

Cash discounts aren't the only factor you have to consider in the equation. There are also late-payment or

delinquency penalties should you extend payment beyond the agreed-upon terms. These can usually run

between one and two percent on a monthly basis. If you miss your net payment date for an entire year, that can

cost you as much as 12 to 24 percent in penalty interest.

Effective use of trade credit requires intelligent planning to avoid unnecessary costs through forfeiture of cash

discounts or the incurring of delinquency penalties. But every business should take full advantage of trade that is

available without additional cost in order to reduce its need for capital from other sources.

Factoring

Factoring is a flexible form of loan, which advances money to a company as it issues new invoices. This is

different to overdrafts or more formal loans, which are usually for a fixed amount.

There are two major advantages of factoring compared to overdrafts or other loans. Firstly, factoring is flexible in

that the amount a company can borrow grows with sales. This is often essential to enable companies to fund that

growth, since they must usually pay for supplies before they receive payment from customers. The second

advantage factoring offers is that no other assets are needed to secure the funding.

How does it work?

A factoring company will lend a company a certain percentage of each invoice that it issues; it will then collect the

invoice when it becomes due and pay the balance back to the issuing company. The factoring company charges a

fee, usually a very small percentage of the value of each invoice, and interest on the amount of money borrowed.

A company must notify all its customers of the new arrangement, and hand over the task of collecting debts to the

factoring company. Often at the start of a new factoring relationship, the factor will take on existing debtors, which

can involve a very substantial payment being made right at the start.

Setting up a factoring deal can be done far more quickly than most other forms of finance.The staff at factoring

companies are often more commercial than at some other lending institutions, and will work hard to help find a

solution for potential client companies.

What about bad debts?

Even though some factors technically buy the invoices from a company, their contracts are very specific that if an

invoice is not paid within a certain time period (usually 90 days) the factor will reclaim any advances it has made

against the invoice.

However most factors will offer a “without recourse” service where the debts are insured. This costs quite a bit

extra but can be worthwhile. Typically insurance will cover 80% of a debt rather than the whole thing, but when a

customer goes bust, getting 80% feels far better than getting nothing at all!

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Task 2 - Examine the factors influencing the decision-making process during financial planning

Decision Tree

A way to look at all the factors influencing a decision within business would be too draw a decision tree.

Planning Tool

o Applies logic to decision making

o Identifies likely outcomes

o Quantitative decision making

Disadvantages

o Reliant on the accuracy of the data used

o Requires qualitative input to give complete

picture

o Probabilities only estimated

o Real time data problems

Advantages

o Useful for operational decision

making

o Enables effective use of back data

o Use of probability allows flexibility

o Scientific/objective analysis to

decision making

o Encourages clear thinking and

planning

Process

o The Decision

o The Alternative

o Estimates of financial cost and benefits

o Identify probability of outcomes

o Squares - where decisions have to be made

o Expected Value - Financial outcome of a

decision

o Do Nothing is an option!

• Decision trees Enable a business to quantify decision making

• Useful when the outcomes are uncertain

• Places a numerical value on likely or potential outcomes

• Allows comparison of different possible decisions to be made

Limitations:

• How accurate is the data used in

the construction of the tree?

• How reliable are the estimates of

• Data may be historical – does this data relate to

real time?

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the probabilities? • Necessity of factoring in the qualitative factors –

human resources, motivation, reaction, relations with

suppliers and other stakeholders

Business Analysis

Data

• Purpose: – Identify where the business stands in relation to rivals, etc.– Collect and use data to inform business decision making– Identify strengths and weaknesses in the business– Use information to inform strategic planning

Method:

• Collection of data from a range of sources:• Market research• Past sales data• Market growth data• Specialist analyst data• Secondary data, e.g. Mintel

You would then collect this data and analysis it using some or all of the following techniques:

Analysis

Trends• Looking for patterns in

data collections• Frequency and reliability

of trends

• Impact of external factors, e.g. seasonal variation, random events, cyclical trends

Averages

• Averages are a measure of central tendency – the most likely or common item in a data series

• Calculated through 3 measures:

– Mean– Median

– Mode

Variance

• Averages have limitations – measures of data spread used to assess width

• Range – difference between the highest and the lowest value

• Standard Deviation – used to measure the variance of the data set from the mean – can highlight how reliable the mean is as being representative of the data set

Correlation

• The degree to which there is a relationship between two or more random variables

• The closer the

Time Series Analysis

• Used to analyse movements of a variable over a time period – usually years, quarters, months, etc.

• Importance of assessing the:

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relationship the higher the degree of correlation

• Perfect correlation would be where r = 1

– Trend– Seasonality– Key moments– Magnitude

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Forecasting

• Focus groups - a group of individuals selected and assembled by researchers to discuss and comment on, from personal experience, a topic, issue or product

• User groups – similar to focus groups but consisting of those who have experience in the use of a product, system, service, etc.

• Panel surveys – repeated measurements from the same sample of people over a period of time

• Delphi method – calls on the expertise and insights of a panel of experts to help with forecasting – seen as being more reliable than data analysis only

– Could be drawn together from around the world as there is no need to have people together at the same time

• In-house judgements – Use the expertise and judgements of those involved in the business in aiding and making judgements

Advantages and disadvantages:

• Data from several years can give accurate guides to future performance• Statistical techniques can make

the data informative and useful• All depends on the quality of the data and the accuracy of the techniques used to analyse

the data

Investment Appraisal

• A means of assessing whether an investment project is worthwhile or not• Investment project could be the purchase of a new PC for a small firm, a new piece of

equipment in a manufacturing plant, a whole new factory, etc• Used in both public and private sector

Types of investment appraisal:

• Payback Period• Accounting Rate of Return (ARR)• Internal Rate of Return (IRR)

• Profitability Index

• Net Present Value (discounted cash flow)

A fork lift may be an important item but what does it contribute to overall sales? How long and how much work would it have to do to repay its initial cost?

Payback Period

• The length of time taken to repay the initial capital cost• Requires information on the returns the investment generates• e.g. A machine costs £600,000, It produces items that generate a profit of £5 each on a

production run of 60,000 units per year. Payback period will be 2 years.

Accounting Rate of Return

A comparison of the profit generated by the investment with the cost of the investment.

For example:

• An investment is expected to yield cash flows of £10,000 annually for the next 5 years • The initial cost of the investment is £20,000• Total profit therefore is: £30,000• Annual profit = £30,000 / 5 = £6,000• ARR = 6,000/20,000 x 100 = 30%

Net Present Value

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• Takes into account the fact that money values change with time• How much would you need to invest today to earn x amount in x years time?• Value of money is affected by interest rates• NPV helps to take these factors into consideration• Shows you what your investment would have earned in an alternative investment regime

For example:

• Project A costs £1,000,000• After 5 years the cash returns = £100,000 (10%)• If you had invested the £1 million into a bank offering interest at 12% the returns would be

greater• You might be better off re-considering your investment!

Internal Rate of Return

• Allows the risk associated with an investment project to be assessed• The IRR is the rate of interest (or discount rate) that makes the net present value

= to zero– Helps measure the worth of an investment – Allows the firm to assess whether an investment in the machine, etc. would yield a

better return based on internal standards of return– Allows comparison of projects with different initial outlays – Set the cash flows to different discount rates– Software or simple graphing allows the IRR to be found

Qualitative Factors

• Other factors need to be taken into account, particularly the effects of decisions on stakeholder groups and their response to such decisions, e.g.

– The takeover of Manchester United by Malcolm Glazer might make financial sense but the reaction of the supporters might make the move unworkable

• Qualitative factors look to take account of these other issues that may influence the outcome of a decision

• Can be wide ranging and especially need to consider the impact on human resources and their response to decisions

SWOT Analysis

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• A decisions (for example, investment in a new production plant) could be considered not only in financial terms but also to apply other techniques of decision making to look at wider issues:

• A SWOT analysis might be part of this:– Strengths– Weaknesses– Opportunities– Threats

PEST Analysis

• Might also need to factor in other external issues that might influence the decision making process which can be summarised as:

– Political– Economic– Social– Technological

• Political could be in its widest sense, e.g. the internal politics of a firm as well as the national and international political effect

For example:

• The decision to site a series of wind turbines in a coastal area might be justified on financial grounds but:

– What is the reaction of the local community?– Does government policy support such planning developments?– Are there social impacts – e.g. noise pollution, damage to eco-systems, etc?

• Such factors may make the difference between success and failure

Stakeholder Analysis

• Wider impacts on stakeholder groups may also be necessary, such stakeholders include:– Employees– Shareholders– Managers– Environment– Local Community– Suppliers– Government – Consumers

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Task 3 – Apply standard costing techniques and analyse deviation from planned outcomes

You are planning to spend money to get your project to work and there will be a requirement on you to establish your BUDGET for your project.

Now! A budget is a guestimate of what you will need to spend and in a lot of cases the proposed budget will be exceeded.

As part of this task you must, after you have established your budget tell your MD (me) the areas that are likely to be exceeded and why.

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The act of budgeting for your business forces you to think through all the important numbers and to develop a picture of what your business is going to look like in three, six, nine and 12 months. A budget is a powerful business tool that will help make better decisions. It enables you to develop and maintain a thorough understanding of the internal financial workings of your business.

The ability to set financial goals for sales, expenses and profits is a true measure of the businesses ability to succeed.

The purpose of a budget is to give a visual description of the expected financial results of your

business activities. When preparing a budget, remember that:

It should cover 12 to 24 months of business operation.

You should work out a complete budget before beginning business operations.

Each month, you should review, revise and update your budgets for the next 12 months.

A basic business budget contains four major numbers: projected sales and revenue; projected total

costs of achieving that level of sales and revenue; the profit or loss from operations based on the

two numbers above; and the cumulative total of profits and losses over time.

The first and most important number is the top line-the estimated sales for the month. This number

should be the result of a complete analysis of marketing and sales activities. Make sure this figure

contains high, medium and low sales estimates. The sales and revenue projections should be based

on experience, market analysis and research. However, it's worth nothing that the business should

still be profitable even if the low sales estimate turns out to be correct.

The next part of a budget should include all the costs of operation involved in producing and

delivering the product or service to customers. These include:

The costs of purchasing or producing the product or service.

Sales and marketing costs.

Your business's administration and operation costs.

All fixed, variable and semi-variable costs of business operation.

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Your final number should include 100 percent of all out-of-pocket expenses necessary to achieve

your estimated sales revenues.

The next part of your budget is the total profit or loss from operations for that month. There will

sometimes be months of the year where your business loses money. In a new business startup, the

first few months will usually show losses. The general sales and profit trends are most important.

Lastly, your budget should reflect the cumulative profits or losses of the company over a period of

months. Profits and losses are added together each month to get a total; these totals tell you when

your business will break even and begin earning a profit. The total of losses will tell you how much

money you will have to borrow or provide to the business before it is profitable. An accurate budget

should reveal the truth about ther businesses potential.

Each major number in your budget should be reviewed each month. You should compare the actual

results in each category against the projected results. The act of studying each number each month

will improve performance in that area.

Areas of a Budget

Rent

A payment made by a tenant at intervals in order to occupy a property or a similar payment for the use of equipment or a service.

Generally rent will be a fixed price but it may need to deviate from the planned outcomes for such reasons as: a need to expand, you could get half way through the year after introducing your product and it could turn into a huge success and you may need to expand your plant to cope with rising demand for your product. If this is the case then ideally profits from the extra units being sold will cover the cost for the extra rent.

Rates

Rates are costs such as electricity, gas, water etc.

These costs are also counted as “fixed costs” normally but as I said above in respect to rent there could be an increase in demand for your product which will require more work and you will need your electricity, water, gas etc. to run the extra buildings required to increase output.

Salaries

A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis.

As long as you keep the same amount of employee’s in your business you will know the salaries are going to stay the same. The only thing to watch out for here is annual inflation increases and possible pay strikes.

You may also need to hire extra workers to cope with extra demand. Or make workers redundant if sales are low.

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Raw Materials

A raw material is something that is acted upon or used by or by human labour or industry, for use

as a building material to create some product or structure. Often the term is used to denote

material that came from nature and is in an unprocessed or minimally processed state. Iron ore,

logs, and crude oil, would be examples.

Raw material costs will change as demand changes. Although with increased demand you may be

able to benefit from economies of scale and buy your material for a discounted bulk price.

Delivery Costs

This is the amount of money it will take to get the product from the factory to the suppliers, this will depend on where the suppliers are, the amount you are transporting and also external factors like fuel prices.

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References

Books

Tooley & Dingle HNC Engineering

Internet Pages

http://highered.mcgraw-hill.com/sites/0072467665/student_view0/chapter30/ - Short Term Planning

http://www.startups.co.uk/6678842908316653519/what-are-business-angels.html - Business Angels

http://www.glitec.co.uk/business-loans/ - Business Loans

BusinessLink.gov.uk – Various Research Information

www.entrepreneur.com

www.startups.co.uk

http://www.bized.co.uk/learn/business/strategy/decision/index.htm

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