Financefornon financialpersonnel-part8-150208202930-conversion-gate02

Finance For Non-Financial Personnel Part 8
Business Driven Finance Insights For Laymen
Decision
Making

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The Structure of Finance
For Non-Financial Personnel
educational: free distribution
8 presentations altogether, if you cannot find all the links, kindly email care@3cthinktank.com to request
Part 5
Part 6
Part 7
Part 8
Accounting systems - the systems are not that simple after
all and how your own system integrates to them. Accounting
systems are not IT systems!
Estimation - any activity (you name it) involves estimation,
how can you estimate better? Budget/ Forecast/ Plan.
How the financial data so important to you? Lean & agile.
Valuables take-away - how to work on numbers that
please your boss? What numbers must you always look
at? The hidden financial formula a boss must have.
Decision making - interpret financial information, perform
critical ratios analysis, read different reports, and use
reports for specific needs. Use management accounting
information for your own management needs.

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Decision Making
… the toughest of all ...

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How People
Make Decision?
Values &
Beliefs
Emotion
Ego
Understanding
Personality
Note: The complete decision making module is totally a different topic. We introduce some of these
methods here so that we can look at using financial information to make decision more meaningfully.

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How People
Make Decision?
Values &
Beliefs
Emotion
Ego
Understanding
Personality
The outer layer are
more obvious.
How you handle this?
Middle layer override
the outer layer and
sometimes are the
blind spots to us.
The deepest of
all & being
ignored. But it is
the real
mastermind
behind all
intentions and
choices making.

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How People
Make Decision?
Values &
Beliefs
Emotion
Ego
Understanding
Personality
The outer layer are
more obvious.
How you handle this?
Middle layer override
the outer layer and
sometimes are the
blind spots to us.
The deepest of
all & being
ignored. But it is
the real
mastermind
behind all
intentions and
choices making.
Those that interfere decision most are found in the
innermost layer. Understanding at the most outer layer
act as connector of individual to outer world.
3 Layers Doctrine For Decision Making
Kindly email care@3cthinktank.com to ask more about this

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How People
Make Decision?
Decision is effected through
INDIVIDUAL or GROUP
The Quality of using financial information
to make Decision Depends on:
1. Completeness of the information -
Presentation Part 4
2. Estimation skills - Presentation Part 6
3. Good financial knowledge from the rest
of the presentation series.

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Decision Versus Action Versus Result
Decide
First
Action
Next
Results Created
Impacts
creation
We regret on the decision made not on the action made.
What you are NOW is the decision you made in the PAST!
Responsible
Due
Care
What to do
when you find
hard to make
decision?

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Example 1: Should we shut down a food outlet?
Background:
A food outlet with capacity to hold 50 pax facing negative
cash flow & manpower shortage.
Head office plans to shut down the outlet.
Basic Information: $ $
1 Monthly Sales 100,000 11 GP/Headcount/Day 183
2 Costs of Sales 45,000 12 Sales/Table Turnover/Day 22
3 Gross Profit 55,000 13 Sales/customer/Day 7
4 Overheads 60,000 14 Net cash from GP 40,000
5 Net Outlet Loss (5,000) 15 Free cash flow GP 30,000
6 Headcount 10 16 Free cash flow GP/customer 2
7 Current Ratio 1.5: 1 17 Break-even point ($) 109,091
8 Cash Operating Cycle 30 days 18 Break-even point (customer) 15,022
9 Table Turnover rate 9 times 19 Break-even point (customer)/Day 501
10 Sales/Table/Day 196 20 Break-even point (Table Turnover)/ Day 10

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Break-even = 501
customers, but capacity
only 450 customers,
how to continue?
We like here, low costs
and can stay long.
Cannot increase customers, need
to increase sales per customer.
How to overcome L/T net loss?
80% of 450 = 360,
we need a taking of
$9.25 per customers
@ 60% GP margin.
The Strategy
Increase take-away sales
Increase corporate sales
Enhance credit control
Increase overheads by $10k
Manage possible impact on
existing customers
Check viability about market,
process, and food quality for
sustainable business model.
Management
Team
Let finance
conduct a
“what-if” for
underperform
sales

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Break-even = 501
only 450 customers,
how to continue?
and can stay long.
80% of 450 = 360,
we need a taking of
$9.25 per customers
@ 60% GP margin.
Looks like continue the outlet is a better
choice, but the challenge is L/T net loss.
How fast can we turn into net profit?
How to resolve the shortage of manpower?
Shutdown outlet, reduce free cash from GP to $20k
Continue without change, free cash from GP remain at $30k
The Strategy
existing customers
Management
Team
Let finance
conduct a
“what-if” for
underperform
sales
Looks
positive
here!

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Break-even = 501
only 450 customers,
how to continue?
and can stay long.
80% of 450 = 360,
we need a taking of
$9.25 per customers
@ 60% GP margin.
The Strategy
existing customers
Management
Team
If Implement Strategy:
Sales= $150k
GP = $90k
Overhead = $70k
Net Profit = $20k
Net Cash fm GP = $60
Headcount = 12
Free cash fm GP = $45
Current Ratio = 2:1
(higher credit risk)
We don’t do
take-away, will
this affects our
image?
I think we
need an
alternate
route for
overheads

£ ¥ € ₳ ₨$
Break-even = 501
only 450 customers,
how to continue?
and can stay long.
80% of 450 = 360,
we need a taking of
$9.25 per customers
@ 60% GP margin.
The Strategy
existing customers
Management
Team
If Implement Strategy:
Sales= $150k
GP = $90k
Overhead = $70k
Net Profit = $20k
Net Cash fm GP = $60
Headcount = 12
Free cash fm GP = $45
Current Ratio = 2:1
(higher credit risk)
Can we
decide
now?
Someone here
needs to be the
sponsor for the
change

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Example 2: What I need to do to my project?
Background:
Product XYZ development project, adopted a metaphor of waterfall and agile
with liberty to act within a set of constraints. Consistently delay in releasing
new version and cannot meet marketing request. The development also not
generating good cash flow.
Basic Information:
1
# of Proposals Accepted/Total
# of Proposals Presented 20% 6
# of Potential Customers x Market
Share x Average Selling Price x
Average Annual Consumption $1m
2
Total Time Required to Gain
Feedback/# of Ideas
Submitted 5 days 7
(Consumer Who Bought Good/Total
Consumers in Segment)*100 5%
3
Total Product Development
Cycle Time (in Days)/# of
Formal Quality Audits 20 days 8
Sum of Expense at Each Phase in
Product Development Lifecycle $350k
4
Total CAC ($)/# of New
Customers $150 9
(Total Revenue Generated by New
Products/Total Firm-Wide Revenue
during the Same Period)*100 1%
5 Net Cash from new product $20k 10 Free cash flow from new product -$15k

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Management
Team
Management
Team
Left 15 days to release new
version and we still not yet
test the product. Late
again, what can we do?
Spent $60k and a further
spending of $10k for this
release, exceed budget by
$15k. To achieve the same
target profit, need to increase
sales by $70k. However our
cash flow with fall by $20k due
to increase in working capital.
We may not
meet
marketing
requirements
on time
Spent total $350k development costs and
achieved 1% of total revenue. This is 5%
behind target and free cash flow still negative.
Will the
manageme
nt cease
the project?
Product XYZ development is
too slow & cannot achieve
market requirements +
financial targets.
It is underperforming, how
can we improve it? What are
the key improvement areas
we are looking for?
Should we
change the
way we
review ideas
to speed up
feedback?
Can use 3rd parties engines to build our
features to reduce the need of testing and speed
up development. Customers will not notice the
different so easily. Cost of development may be
lesser but cost of sales will increase by 5%,
more sales need to achieve.

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Management
Team
Management
Team
Left 15 days to release new
version and we still not yet
test the product. Late
again, what can we do?
Spent $60k and a further
spending of $10k for this
release, exceed budget by
$15k. To achieve the same
target profit, need to increase
sales by $70k. However our
cash flow with fall by $20k due
to increase in working capital.
We may not
meet
marketing
requirements
on time
Spent total $350k development costs and
achieved 1% of total revenue. This is 5%
behind target and free cash flow still negative.
Will the
manageme
nt cease
the project?
Product XYZ development is
too slow & cannot achieve
market requirements +
financial targets.
It is underperforming, how
can we improve it? What are
the key improvement areas
we are looking for?
Should we
change the
way we
review ideas
to speed up
feedback?
Will 3rd
parties
products
affects our
brand?
Can use 3rd parties engines to build our
features to reduce the need of testing and speed
up development. Customers will not notice the
different so easily. Cost of development may be
lesser but cost of sales will increase by 5%,
more sales need to achieve.
Market is
expecting new
features in this
release.
I rather push
the date for
release then
Propose use
3rd parties
products to
reduce R&D
time
Good idea,
provided the
management
don’t respond to
our idea so slow

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Management
Team
Management
Team
Propose Strategy:
Use 3rd parties
engines to reduce
development time
by 30 days & can
release on targeted
dates. Idea needs
to approve fast.
Accept Strategy:
Change brand &
position to take
advantages of faster
product development.
Need to monitor
closely the impact after
strategy launched.
Company S/T cash
flow affected badly, but
L/T cash flow increase.
Impact on Project:
Devt cost reduced by = $20k
ROI on the change = 35%
S/T cash new product = -$50k
L/T cash new product = +$70k
Sales on new market = $1.5m
Impact on company:
To sales other products = $200k
Overall Net Profit = $90k
Overall cash flow (S/T) = $15k
Overall cash flow (L/T) = $500k
Contribution/ XYZ = $5k
Overall free cash flow (L/T) = $300k
Sales on new product/ Total = 2%
Cash conversion rate (L/T) = 15%
This can solve
temporarily problem.
In L/T challenge -
we face 3rd parties’
qualities +
integration issues.
The
management
team does
not know this
Marketing
activities
need to
adjust this.
We need to
take note of
cash flow
burden
We need to
track customers’
reaction + the
pace of sales
growth

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● We make decisions everyday and everytime.
● Financial information is critical for decision making
● You also know how individual & group affect decisions
● Use accountant to provide relevant financial information
for good decision making.
Are You On Track?
Last Overview Presentation On
Finance For Non-Financial Personnel.
Business Driven Finance Insights For Laymen

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1. Work with accountant to obtain the financial numbers you want.
2. Financial knowledge from your own viewpoint is more critical to
your performance and career progress.
3. Know exactly what you need to act to influence the financial
numbers make you very AGILE
4. Your competitiveness is not the acquiring of financial knowledge
but the ability to use financial knowledge to improve yourself.
“Learning A Lot” Compare to “Learning
Correct” Makes A Big Different
Conclusion For 8 Presentations

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care@3cthinktank.com
3CTT is a management consultant who advise and run projects for holistic business solutions,
usually end-to-end, to improve business and make achievements. They cover all business
functions with unique IT enhancements to increase companies’ competitive advantages,
maximizing revenue, liquidity, & profit while designing highly effective organization.
We had been recognised by many as Trusted Advisor, Growth Driver, Turnaround Expert,
Exceptional Motivator, Strategist, Business Designer, and Dynamic Change Agent
For more information: www.3cthinktank.com
8 presentations altogether, if you cannot find all the links, kindly email care@3cthinktank.com to request
All the 8 presentations are the overview, PLEASE
email us if you like to get more benefits from them.

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