Finance department:

Finance department

The Costs of Starting a New Company:

When a club starts up for the first time or launches a new product it has to work out
carefully the costs involved. It also has to look at the money it will receive from our sale of
the new product. The club will then be in a position to decide whether or not to go ahead
and this will depend on whether it can cover its costs.
A club starting up for the first time or launching a new product will need to plan what
resources we needs, e.g. new staff, new premises, new till machine and all these involve an
added cost for the business.
Some costs are off start-up costs e.g. premises and machinery.
Some costs are day to day running costs e.g. wages, advertising, and rent.

Starts up costs

When starting a club for the first time, or when it expands, I need to plan what will need to get going
first for example.
Premises we can rent the premise, which is cheaper in the short term.
Machinery and Equipment the business may need machinery, such as computers, photocopiers, and
delivery vans. Also we can rent if we don’t have the cars.
Market research and advertising, time and money can be spent in market research finding out the
questionnaires and interviews whether the new business idea will sell. People will need to be hired to
do this if necessary and this will cost money. Any new product will also need effective promotion and
advertising, which can be expensive.

Running costs for the new business

The start-up costs we have just looked at, there will be a wide variety of running costs that a new or
an expanding our club business that we need to think about.
It is important to know the difference between running costs and start-up costs. For example if you
think of buying a new radio. The start-up costs are the price of the machine; the running costs are
items like batteries, which you buy from time to time to keep it playing. Running costs in a business
are normally estimated for the period of a year.

Types of running cost

Running costs for each of these areas Production goods bought by a shop to sell to our customers, air
fares and hotel charges for travel and food for restaurants.
Sales and marketing, make sure that the right products reach the right customers in the best possible
way, advertising, getting customer feedback, providing customer care.
Human resources, the cost of employing staff, e.g. wages, recruitment costs, staff perks, training,
Health and safety (making sure people are safe at work).
The finance cost of running a club, paying interest to the bank if money is borrowed, bank charges,
paying accountants fee.
Administration, The day to day costs of running the club insurance, rent, rates, power, stationary,
telephone bills and postage etc.
                        THE DESCRIPTION OF BUSINESS

               PRODUCTION OR    SALES &              HUMAN
                                MARKETING            RESOURCES          FINANCE          ADMINISTRATION

                    $                 $                   $                $                 $

        Finance Manager: Plans, records and monitors the flow of money in and out of the business.
        The financial cost to run the business, paying interest to the bank if money is borrowed,
        bank charges, paying accountants’ fees, Paying all the workers, Financial documents must be
        completed accurately to avoid expensive mistakes and loss of business.


        COSTS FOR THE FIRST YEAR:                     $
        PREMISES PURCHASED                            $
        ELECTRICITY BILLS                             $
        OFFICE ADMINISTRATION COSTS                   $
        EQUIPMENT PURCHASED                           $
        FURNITURE PURCHASED                           $
        RATES                                         $
        FUEL                                          $
        INSURANCE                                     $
        WAGES                                         $
        CARS AND VANS PURCHASED                       $
        INSURANCE FOR CARS AND VANS                   $
        ADVERTISING DURING THE YEAR                   $
The finance department deals with all the financial matters in the business. The modern
finance department has an extensive data processing system backed up by computers.
The main functions of the finance department are:
Obtaining financial information from different departments
Recording financial information (this is commonly known as book – keeping).
Working out payment of staff wages or salaries
Providing information about the amount of money (capital) needed to run the business
Analysing and interpreting financial information.
Providing information about the business’s performance to teams and shareholders

The activities within the finance department and its Responsibilities

Raising invoices and obtaining payment for goods or services supplied to customers
Making sure that invoices from suppliers match the goods or services that are supplied to
the organisation
Dealing with payments to suppliers
Paying staff
Dealing with debts
Analysing the financial performance
Providing financial information on business performance to managers and shareholders
Arranging loans and additional finance for the business
To decide on the business credit policy
To ensure the effectiveness of the payroll system
To make sure that outstanding bills are paid and money has been collected.
 To make sure that the business’s financial books are balanced and kept in order.
To decide on the best method of obtaining finance for the business
To ensure that the company’s activities are profitable

Paying wages and salaries
The finance department is responsible for the payment of wages and salaries. If employees
are paid weekly, this is normally called a wage and if employees are paid monthly, this is
normally called salary. Wage and salary are the returns (payment) for the people who work
(Labour). Whether payment is made by cash, cheque or credit transfer to the bank account,
the employee receives a pay advice. This is usually a slip of paper that is filled in by the
wages section in the finance Department and often done by computer. Employees can see
how much their gross pay is and what deductions there are.
There are two different types of deductions:
Compulsory deductions such as income tax and National Insurance
Voluntary deductions such as union membership fees, contributions to company social club,
private pension schemes, private medical schemes e.g. Medico or Cemas
What employees actually receive is called net pay. This the amount of money left after
deductions have been made.
Key Terms

Accounts: The financial records of a business that are used by manager’s owners,
employees, creditors, and others to show how well the business is doing.
Also one of the main functions of a finance department is to record and keep financial
records (accounts) so that the firm can keep track of how money has come in and how much
has gone out. This allows costs to be measured against revenue (income) so that it is
possible to calculate levels of profits or losses made. The finance department also has to
supply accounts to the revenue for tax purposes, and keep accurate records of all VAT (Value
added Tax) for customs and excise.
Another job of the Finance Department is to produce the annual report if the company is a
public limited company.

Management accounting

One of the main functions of the finance Department is not only to obtain financial
information, but also analyse this information. Also this analysis is important because it
helps managers to make the right decision about the running of the business and find out
how well the business is doing and helps them to make decisions about the business. For
example the Finance Department keeps accurate records of all payments so it will be able to
help the marketing department decide on prices.

Gross Pay:
Is the total amount that is earned by the employee before any deductions have been made?
Income Tax:
Money deducted from each wage or salary payment through the payee (pay as you earn)
National Insurance:
Is a weekly or a monthly contribution to the state welfare scheme (for example health
services in Europe countries)? This is taken from each payment of wages or salaries. Both
employer and employee make a contribution to the scheme.
Net Pay:
The amount of money an employee receives after deductions have been made for income
tax, national insurance, and any voluntary contribution.
The payment or reward for labour, providing its service usually compromising either a
weekly wage or monthly salary.
Payment System:
 A method of organising payments of employees, either time rate, or piece rate, and bonus if
Salary: a type of payment to an employee where a certain sum is negotiated on an annual
basis and is paid monthly, salaries are common for payment of highly earned workers.
Tax: the compulsory contribution of money to the government. It is a major source of
income to the government.
Wage: the basic reward paid for the provision of labour as a factor of production. A wage is
usually paid on an hourly or weekly basis.

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