Business Financial Planning

Whether it is starting a business, expanding or even just thinking about starting up, the last thing on anyone’s mind is the financial side of the business. Even further removed would be the assurance and insurance needed for the business. The value of insurance and assurance policies in business is impossible to comprehend. There are so many different types of assurance and insurance available to the business; it is no wonder that one can be overwhelmed when looking at these things. The act of doing a business plan is tedious, daunting and possibly tiresome.

Amber Wealth tmodern buildinghrives on making the process understandable and as smooth as can be when dealing with the act of Business Financial Planning. It is a healthy exercise to go through and could very well mean the difference between insolvency and continuation.

Here is an overview of what Amber Wealth can assist the business owner in acquiring:

Short term Insurance

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A business has assets and these assets need capital protection in the events of theft, fire, and other potential disasters. Should any event happen where stock, furniture, electronic equipment or vehicles need to be replenished or replaced as well as the wellbeing of staff and business practice need to continue; then short term commercial insurance is what is needed.

For example imagine a shop with stock, the delivery vehicle parked in the garage, office furniture and all electronics such as POS systems and computers were obliterated in a fire one cold winter night. This would not only have the consequence of the goods needing to be replaced but the following as well:

  • salaries need to be paid
  • suppliers need to be paid
  • rent needs to be paid
  • Fixed expenses of the business such as banking charges, tax and hp agreements need to be paid
  • The business will need time to rebuild
  • Once official reopening, the business needs time to build a customer base up again, thus suffering further economic loss

All this can be wrapped into a solution of short term commercial insurance.

Buy and Sell Insurance

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Where there is a business with more than one partner, buy and sell agreements are necessary for the protection of the business in the event of death, disability and even severe illness. This type of policy protects the business ensuring that the families of the deceased partner cannot take over the now deceased or disabled partner’s share of the business. It could put the business into jeopardy should that happen and this family member has no experience, the wrong connections or even simply does not have the business interests at heart.

How does it work?

  • Each partner would take out some form of collateral like a life policy on the life of the other partner/partners which would cover mainly the events of death and disability
  • The premiums will need to be paid by those taking out such a policy as to ensure the transaction becomes exempt from Estate Duty Tax.
  • The policies will need to cover each shareholder for the value of their share of the business.
  • The living partners will then have the opportunity to pay the estate/widow/widower/children of the deceased partner the value of the shares and continue business in a normal fashion and equally share out the portion of shares of the deceased/disabled as per the buy and sell agreement.

Key-man Insurance

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Most companies will have at least one Key-man. The person that should they leave the company in any which manner; the company will suffer a financial loss. This is the person that keeps the wheels of the company turning and moving forward. They have the skills, experience, relationships and qualifications that will make it very difficult and costly to replace them. This will mean should they stop working due to disability or pass away, the business will be subject to a loss of revenue. These ‘keypersons’ could be managers, capable sales people, or even the director. Below is a quick guide to see if key-man insurance is necessary in your business:

  • In the event of death, disability or illness will the business be financially impacted by loss of revenue without this said key person there?
  • Will it take time to recruit a competent person to replace this said person and at what cost to the company?
  • How much time and resources will it take to train the new recruit?
  • How much will a recruitment agency charge to find the replacement?
  • How much time will it take to recoup lost revenue?

Key-man Insurance is a life policy that will financially gear the company for an unexpected event whereby they lose the Key-man due to death, disability or illness.

Business Contingency Plans

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As with most start-up companies and any other company for that matter that need extra financing, someone needs to sign surety for the loan, overdraft or whatever credit type agreement that has been entered into. In most circumstances a personal asset and liability sheet is drawn up. The assets are ceded as surety in some cases, or the creditors have a sense of security that the director has a good personal net worth to cover the debt. Should the director die, get disabled, company be unable to fulfil the agreement, no other guarantor can be found then some form of contingency plan is affected.

For example a life policy covering death and disability for the value of the loan. This will be taken out by the company and paid by the company.

Business Overheads Replacer

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When starting a business it is often up to the owners to cover the main expenses of the business such as:

  • Rent
  • Taxes
  • Utilities
  • Bonds/loans
  • Maintenance Costs
  • Accounting Fees
  • Insurance Premiums
  • Salaries

What should happen if one of them were to fall ill or become temporarily disabled? All these costs still need to be covered, thus a Business Overheads Replacer will cover such expenses while the owner recovers. This will make good on the contribution the owner would have been making should they have not been ill or disabled.

Director Loan Account
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Often the directors cannot pull a salary in start ups and more often than not they have also contributed capital to the company. This will all be put into a loan account. Should the director leave either by resignation, death, or selling shares they would need to be awarded this amount back.

In terms of death a life policy will cover the rebate to the estate, an investment will cover the selling of shares or resignation.

There will also be times that the directors will make loans from the company that will need to be paid back in the event of leaving through any such means. The same means apply toward paying the company back.

Employee Benefits

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A business has a social and moral obligation to its employees. Without them the business cannot operate. A great way of reward is through employee benefits such as:

  • Group life covering disability, death, funeral and even illness
  • Medical Aid contributions
  • Retirement savings through either provident or pension funds

These yield benefits to both employer and employee such as:

  • Tax benefits
  • Staff loyalty
  • Social and moral responsibility fulfilled
  • Peace of mind for employee that there will be something for retirement

Business Planning

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Essential to any business is a plan to plot the way forward, a plan to highlight future financial trajectory or even just a growth strategy encompassing marketing, staff, and future product.

A good business plan needs the following:

  • Executive Summary
  • Key Strengths
  • Competitive Edge
  • Service/Product Summary
  • Marketing Plan
  • Competitive Analysis
  • Contingency Plan
  • Market Analysis and Research
  • Sales forecast
  • Start up funding summary (if starting up)
  • Profit and Loss
  • Balance Sheet
  • Past Financials (if applicable)
  • Company Summary and history
  • SWOT analysis
  • Management Summary
  • Exit Strategy (if applicable)

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