How to finance a small business?

The first step in financing a small business is to design a comprehensive business plan and begin financing the venture from personal assets and capital derived from family and friends. The business plan will help to: define where the initial cash flow should be directed and give the entrepreneur a platform to pitch to friends and family while developing and refining strategy to seek further financing from either bank loans and/or private investors. Decisions also need to be made in regards to the entrepreneur's acceptable threshold for equity or percentage of profits exchanged for financing.

This business plan should include the following elements:

Business plan

1. Description of idea - SWOT
2. Description of expertize
3. Description of the product
4. Customer and customer requirements
5. Industry and competitors
6. Scope of development of the market - market size potential for expansion
7. Marketing & advertising
8. Risks - analyze short term (starting capital) and long term risks
9. Secure IP rights if possible
10. Estimates -
• Funding calculations

(1st round: Family, friends & fool. 2nd round: Investors, banks, grants.)

• Initial purchases
• Fees to establish a company
• Travel & meetings
• Working capital of the 3-6 months
• Fixed cost estimate

• Profitability calculations
• Break even point
• Price & margins
• Sales target (wks, mo, yrs)
• Sensitive analysis
• Scenarios & alternatives

• Sales calculations
• Min. invoiced sales target indicated by the profitability calculation
• Different customer channels, estimated quantities
• Sales discounts and cost of products should be taken into consideration

Source:

J. Borra (2016). Guide to Entrepreneurs in Finland by Juan Borra. [online] Available at: https://prezi.com/hmih9mo11kgu/guide-to-entrepreneurs-in-finland-by-juan-borra/ [Accessed 31 Oct. 2016].

How to manage accounting for a small business in Finland?

The Finnish Accounting act requires an enterprise to meet the following criteria in order to be considered an small business:

• Have a balance sheet of 6,000,000 € or less (350,000 € or less for a micro enterprise)
• A document consisting of 2 parts. 1 part detailing assets and the 2nd part detailing liabilities and shareholder equity. 

Assets = Liabilities + Equity

Brief and simple video explaning a balance sheet in broad strokes: https://www.youtube.com/watch?v=mxsYHiDVNlk

• An annual turnover of of 12,000,000 € or less (700,000 € or less for a micro enterprise)
• Turnover being revenue or income from sales

• An average of 50 employees or less (avg. of 10 or less employees for a micro enterprise)

In the case of the pastry chefs in our trigger, Ken and Jimmy may only be required to maintain their books with single entry bookkeeping (only recording income and expenses), but we have faith that Ken and Jimmy can pass the 200,000€ turnover threshold and will be required to use double entry bookkeeping. This means that all transactions will have to be recorded into at least 2 separate accounts. If Jimmy buys an oven for 1000€, the transaction will be recorded as a 1000€ debit for their asset account and a 1000€ credit in their cash account.
A basic example would look something like this:

Oven (debit asset acct) 1000€
Oven (credit cash acct) 1000€

This very simplified example shows the golden rule of double entry accounting, the transaction is recorded to show that the accounts are in balance. The accounts must cancel each other out in order to show where assets came from and where assets went. These entries can span multiple accounts as long as the credit and debit entries equal the same number. This is all done in the service of maintaining the equation of
Assets (Debits) = Liabilities + Equity (Credits).

A kind of funny video that breaks down the basics of double entry accounting: https://www.youtube.com/watch?v=2-HK4qSz6cA

A couple of more detailed videos:
https://www.youtube.com/watch?v=PSDvzUwdYRo

https://www.youtube.com/watch?v=cHzCOA3b9So  

Perustamisopas.fi. (2016). [online] Available at: http://www.perustamisopas.fi/sites/perustamisopas.fi/files/perustamisopas_suk_2016_en_web.pdf [Accessed 31 Oct. 2016].

What are the legal & financial responsibilities of a start-up?

First thing first, before operations can commence a decision will have to be made on the form of business that the venture will take. Following that, the business must be registered with the Finnish Patent and Registration Office (PRH 2016) and be placed on the Finnish Trade Register. Through the Business Information Service (YTJ 2016) an entrepreneur can register with the Patent and Registration Office and Vero with a single document.

Employers are also obliged to maintain a tax account with Vero, then calculate and pay their appropriate share using a Periodic Tax Return Form. Reports and payments can be made monthly, quarterly or annually. The tax account types taken from the Vero site are:

(Vero 2016)

An annual information return must also be submitted (by mid to late February in most cases). The information contained within should include all details that have an impact on another taxpayer’s tax assessment, some of which include: cash payments, fringe benefits, dividends, profit sharing, interest on said shares, pension benefits, various tax deductible payments, and even assets and property in some cases. (Vero 20162 )

Prh.fi. (2016). PRH - About the Trade Register . [online] Available at: https://www.prh.fi/en/kaupparekisteri/rekisterointipalvelut.html [Accessed 31 Oct. 2016].

Vero (2016). Finnish Tax Administration > Tax Account . [online] Available at: http://www.vero.fi/en-US/Companies_and_organisations/Tax_Account [Accessed 31 Oct. 2016].

Vero2 (2016). Finnish Tax Administration > How to file annual information returns - companies and organisations . [online] Available at: http://www.vero.fi/en-US/Companies_and_organisations/Annual_Information_Returns [Accessed 31 Oct. 2016].

YTJ. (2016). Perustamisilmoitus. [online] Available at: https://www.ytj.fi/en/index/whatisbis.html [Accessed 31 Oct. 2016].