1. WHAT TO CONSIDER WHEN SETTING UP A FINANCIAL PLAN?
To make a
financial plan, our example entrepreneurs need to consider three things. How
much money they will need to start the business up, before it starts producing
money, and where they will get this money from? Then they will need to
calculate how much they will need to make in order to break even, this is
called profitability calculation. Third thing to do is to evaluate sales, in
other words they need to make a sales calculation.
Investment calculation
For
investment calculation, one should roughly estimate the amount of money they
will need, and get, before the company will start producing money.
Below are some explanations of
terms:
*For example in Finland registering
fees vary from 110 EUR to 330 EUR depending on type of business.
**Fixed costs are categorized below
in the profitability calculation.
***Investors who invest into small
businesses either one-time or ongoing.
****Finnvera is a special financing
company for businesses.
*****Usually for 6 months, and
around EUR 705 - 1,130 per month.
Profitability calculation
After evaluating the total sales
needed in order to cover all the costs, in other words, to break even, the
entrepreneurs need to calculate sales prices for their products. It is done as
follows:
-total costs of the product (for the
entrepreneur)
+total sales margin
=sales price exc. Vat
Price+24%
=price incl vat
Reference: Https://prezi.com/hmih9mo11kgu/guide-to-entrepreneurs-in-finland-by-juan-borra/
Reference: Https://prezi.com/hmih9mo11kgu/guide-to-entrepreneurs-in-finland-by-juan-borra/
Sales calculation
Next step is to evaluate the sales by product, calculate the margins they will be getting, and see whether they will earn enough to keep the business running.
In here they should take into consideration
following things:
-product losses
-competitors and their prices
-total sales should be equal or
exceed the total sales required in the profitability calculation.
2. HOW TO SET UP ACCOUNTING OF A SMALL BUSINESSES?
All companies in Finland are
required to keep book of all their transactions. Investopedia defines
accounting as follows: "accounting is the systematic and comprehensive
recording of financial transactions pertaining to a business". (2) in Finland,
company's size determines, what kind of bookkeeping they must uphold. (3) our
entrepreneur's café would fall
under the "micro enterprise" category.
It is the entrepreneur's duty to do
daily bookkeeping, which consist of following:
-sales invoices (or receipts)
In other words, all material that is
generated when dealing with other companies, customers, banks and authorities.
(4)
The accounting records may be either
paper or electronic records. These days, however there is an abundance of
electronic financial management systems, which facilitate bookkeeping, so many
entrepreneurs opt for electronic accounting. (3)
It is advisable for a small company
to hire an accountant. In addition, an accounting company can help out with
payrolls as well as cash flow planning. (3)
By law a company must document
transactions including receivables, payments, liabilities, capital, corrections
and transfer instalments. Everything must be marked as a plus or a minus. Every
transaction needs to have some form of verification document, such as a
receipt.
Every transaction will be registered
to a balance sheet. (5)
-purchase invoices
-payslips
-bank
statements (3)3. WHAT LEGAL ASPECTS SHOULD ONE CONSIDER WHEN STARTING A SMALL BUSINESS IN FINLAND?
Being an entrepreneur differs from being an employee. For example, the legal responsibilities of an entrepreneur are quite different. Let’s have a quick look at what type of laws are applied to an entrepreneur:
Accounting:
We already looked at accounting before. There are, however several legal aspects to consider. The decree 1753/2015 defines these aspects. (6)
For a micro enterprise there's no need to make an annual report, a financial statement, however is necessary.
Pension:
An entrepreneur is justified to start their employment at the same age as an employee, but with a 0,4 percents lower for each month they brought their pension forward from that, allowed in the entrepreneur law. 72/2016
Unemployment:
An entrepreneur is not equal to an employee in case of unemployment benefits, if the business goes down. An entrepreneur need to have an insurance to cover their possible unemployment.
Unfortunately, when dealing with an insurance company instead of Kela, the unemployment is not always covered as insurance companies tend to work more in their own interests instead of their customer's interest. For an example, see the case http://yle.fi/uutiset/3-8791666.
Hiring an employee:
When hiring an employee, the entrepreneur need to follow certain rules:
-contract of employment must be drawn
-salary needs to be in accordance with Finnish collective labour agreement
- How much to pay
- When to pay
- What fees to pay in addition to the salary (taxes, tyel, etc.)
-insurance
-working hours
-healthcare (7)
Permits:
In finland an enterprise will need applicable permits. For a café these permits would include a permit for selling food, and possibly a permit for selling alcohol. In order to serve food or alcohol, strict set of rules has to be followed. (3)
Taxes:
Unlike an employee, an entrepreneur
needs to do their own taxes. If an accounting company is hired, this task can
also be allocated to them.
References:
4. Anttonen, m. Hakonen, m. 2011, Taloushallinon
taitajaksi
5. Black, g. 2009, Introduction to
accounting and finance
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