#Immediacy on speech making

The purpose of this exercise is to spread the cost of the ...

The purpose of this exercise is to spread the cost of the capital item over a number of trading years so that its effect on profit is not all loaded on the year of purchase.

However, this is a somewhat notional process recommended by accountants to reflect true trading results each year.

From a cash flow point of view the money is actually spent in the year that the purchase is made, and depreciating an asset is a 'website exercise' only. It should also be noted that the tax inspector, when deciding capital allowances for the purpose of tax calculation, has his own ideas about how long an item should last and how much allowance can be permitted each year. Your own view as to what is the most sensible and representative rate of depreciation may differ from that of the tax inspector. To prevent confusion, it may be better to accept and use the tax inspector's figures.

Cash-flow forecast By now, your business experience has probably taught you that profit is not the only touchstone of success.

Equally important and sometime more so is cash flow. You may have had to wait until a customer's cheque was obtained, perhaps by a personal visit, and 'expressed' through the bank before you could cash a cheque for wages or buy the groceries. Other unfortunates have learned that a business can be trading profitably and yet still go bust because they didn't watch the cash flow. So we shall discuss cash flow too in this section.

The purpose of a cash-flow forecast is to plot the month-to-month fluctuations in your income and expenditure. This indicates the tight spots so that you can take avoiding action in advance rather than cope with crises after they have happened.

The resulting fluctuations in cash balance, after you have done what you can, give an indication of how much working capital you need. Take another large sheet of paper, but this time rule it into thirteen vertical columns: one for the list of items and one for each of the next twelve months.

Put the same items in the first column and transpose the figures from the Operating Budget to the Cash-Flow Forecast; only this time put the money figures down for the month when the money is due to be received or paid. Although the turnover is the same for each month, your experience will suggest how much of the money you are likely to receive during the month of sale some may be received in advance and some a month or more later.

Similarly, with the items of expenditure you will know when the items ...

Similarly, with the items of expenditure you will know when the items probably must be paid in practice. If some items are paid weekly ie wages watch for the five-week months and ad... read more

In effect, the business is generating cash which can be used for ...

In effect, the business is generating cash which can be used for its own expansion. Whether you choose to do so or leave the business ticking over... read more

If it is readily available at the same price as you paid ...

If it is readily available at the same price as you paid and does not involve extra costs for delivery and fitting, its replacement value is the same as you paid for it. But