A framework for introducing best practices in financial management, aimed at SME businesses. *DISCLAIMER* This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business you should consult a qualified making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation.

1. Leveraging Financial Management in
Driving Sustainable Growth for SMEs
Planting the seeds today for a ripe harvest tomorrow
Deloitte Southeast Asia
October 2012

2. There are 3 parts to the framework – A process cycle for financial
management, a questionnaire to assess process maturity and a maturity
model to structure performance improvement plans
Process cycle Assessment questionnaires Maturity model
• We have developed a process cycle • A series of questionnaires that can • A model that plots an organization’s
that describes best practices in be used as a diagnostic tool for a gap development from Initial start-up
financial management. analysis. through to an Optimized state.
• This provides a framework for • This focuses the attention on the • Used to develop a performance
describing best practices with areas that need the most improvement plan for an organization
common terminology. improvement. to move it from its current state
• The questionnaire is read in through to desired state.
conjunction with the Maturity model.
1 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

3. This Framework is designed to instill financial management best practices
through a holistic financial management system
1. Diagnose current position 2. Innovate
business
model
6. Continuous
improvement
3. Develop
budgets
and targets
5. Control
operations
4. Capital
decision
2 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

4. This Framework of models, questionnaires, and techniques, are designed to
help SMEs partner with Deloitte and diagnose and develop their business
Diagnose current position Innovate business model Develop budgets and targets
The best strategies are the ones Resource-based strategies The strategic direction plotted in
which take advantage of the alone are insufficient to generate the business model is then
competitive landscape and lasting growth. SMEs need to described in operational terms
internal competencies look to innovation to power and linked from operational
Some tools we use include: sustainable growth. levers to business value.
• Porter’s 5 forces Some tools we use include: Some tools we use include:
• SWOT analysis • Business Model Generation • Budget templates
workshop • Enterprise Value Map
• Cell-based growth strategies
• Modeling “What-If” scenarios
Capital decision Control operations Continuous improvement
With the budgets we are then Once the business model is SMEs need to periodically
able to assess the viability of the operationalized, SMEs need to monitor the progress of their
business. The business plan control their ongoing operations. businesses
produced can be used to seek Some tools we use include: Some tools we use include:
additional equity financing (from
• MARCI charts • The DMAIC performance
investors) or debt (hire
improvement methodology
purchase, mezzanine debt etc)
Some tools we use include:
• Business plan templates
3 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

5. The Framework in
detail
4 Growth Framework for SMEs – October 2012

6. A robust method for instilling financial management best practices to create
a holistic financial management system
1. Diagnose current position
5 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

7. Market leaders create more shareholder value than their peers through
developing core competencies and exploiting their competitive positions
(note: usually we only consider factors shaded in green in startup situations)
What are the How can we
known areas for better deploy
improvement? resources?
Is the business How do we define
the market and
competitive
segment
against peers ? These factors drive customers?
our assessment of
Where is the Are there
adjacent
industry markets we can
heading? tap?
Diagnose current position
6 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

8. A robust method for instilling financial management best practices to create
a holistic financial management system
2. Innovate
business
model
7 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

9. The Business Model Canvas gives us a tool to visualize an SME’s business
model. Once visualized, we can create new strategic insights based on the
industry trend and the company’s competitive position
Key Key Value Customer Customer
partners activities propositions relationships segments
Who are our “Key What key activities do What value do we What type of For whom are we
partners”, what “Key our “Value deliver to the relationship do our creating value?
activities” do they propositions” require? customer? “Customer segments”
perform and what “Key expect us to establish
resources” do they and maintain?
bring to our business?
Key Channels
resources
Through which
What key resources do channels do our
our “Value “Customer segments”
propositions” require? want to be reached?
Cost structure Revenue streams
What are the most important costs inherent in our business For what value are our customers really willing
model? Which “Key activities” / “Key resources” are the most to pay? What do they currently pay and how much would
expensive? they prefer to pay? What is the contribution of each stream
to total revenues?
Source: adapted from http://www.businessmodelgeneration.com/
8 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

10. A robust method for instilling financial management best practices to create
a holistic financial management system
3. Develop
budgets
and targets
9 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

11. The goal setting process is a top-down process. Value drivers are identified
and the business should identify strategies that maximize these drivers.
Goals are then created to deliver these strategies.
Shareholder
Value
Operating margin
Revenue growth Asset efficiency Expectations
(after taxes)
(COGS) Cost Property,
Price Selling, General Receivables Company External
Volume of Goods Equipment Inventory
Realization & Administrative & Payables Strengths Factors
Sold & Plant
Strategy Strategy Strategy Strategy
• Broaden market • Increase efficiency • Divest idle assets • Negotiate exclusive
base. Business through investment • Monitor inventory rights to use
model may change in new production utilization on a unique IPR which
to sell direct to methods and regular basis can differentiate the
consumer technology business
Goals Goals Goals Goals
• Grow revenues at • Reduce average cost • Increase fixed asset • Secure exclusive
2% p.a. per unit to < $10 utilization by 10% rights by FY13
• Implement new • Reduce inventory
direct sales days to < 24 days
channel
10 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

12. A robust method for instilling financial management best practices to create
a holistic financial management system
4. Capital
decision
11 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

13. Deciding how much debt to take on in the capital structure is a trade-off
between risks and returns. The key is to strike the right balance.
• Appetite for • Alignment of
risk capital
‒ Trade-off structure to
between risk operating
and return model
‒ Matching of
cash flow
profile
between
Capital Operations
structure and Financing
• Sources of • Taxes and
funding cost of debt
‒ Hire purchase ‒ Is it better to
‒ Convertible substitute
debt Equity for
Debt?
12 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

14. A robust method for instilling financial management best practices to create
a holistic financial management system
5. Control
operations
13 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

15. There are two dimensions to Control operations that SME’s should consider
when appraising their businesses
Periodic identification of the Control environment
sources of Value and their • This encompasses
attached Risks management’s philosophy, the
• Periodic update of the risk appetite organization structure and
and profile of the business institutionalized processes
Understanding of which Risks Control activities
have the greatest Value impact • Controls should be designed to
• This should take into account Control address the identified risks
Upside Risks and Downside Risks Operations
Prioritization and risk Controls monitoring and
management strategy assurance
• Develop a strategy for dealing with • Controls should be tested
the risks – Mitigate, Assure, periodically
Redeploy, Impact assess.
14 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

16. A robust method for instilling financial management best practices to create
a holistic financial management system
6. Continuous
improvement
15 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

17. The continuous improvement phase is a feedback loop that focuses efforts
on improvements, optimizations and stabilizing the business.
Define Measure Analyze Improve Control
Goals, KPIs and Different reports and Root-cause analysis Monitor
Find solutions
objectives defined data are gathered performed improvements
Grow sales 2% • Sales reports • Poor customer • Print address of • Offer rebate
• Implement direct showing sales awareness lead to new internet web redemption codes
sales channel categorized by poor sales in new site on invoices to test take-up of
strategy sales channel direct sales new sales channel
channel.
Increase margins • Sales reports • New brand • Reallocate sales• Reports are
• Introduce new showing sales cannibalizes channel to reduce generated
products with categorized by existing sales. cannibalization. periodically and
unique branding brand name • Discounts accepted • Work with suppliers emailed out
• Reduce average • Cost of sales at the cost of to identify ways to • Sales & Marketing
cost per unit < $10 reports showing increasing lead reduce lead times and Vendors are
Average cost per times required to explain
unit sold variances
Improve Working • Inventory listing • Operations over- • Work with suppliers • Suppliers offer to
capital management • Fixed asset ordered products to identify ways to leave some
• Reduce inventory utilization report because of reduce lead times consignment stocks
days to < 24 days worsening lead • Order sufficient with logistics
times spare parts and provider
• Increase fixed asset
utilization • Poor availability of consider buying • Regular inspection
spares meant more maintenance and parts ordering
assets were kept contracts by service provider
16 Growth Framework for SMEs – October 2012 than needed. © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

18. Contact details
17 Growth Framework for SMEs – October 2012

19. For further details, please contact: Keoy, Soo Earn (skeoy@deloitte.com)
Seow, Tien Long (tseow@deloitte.com) Ryan, Izam (iryan@deloitte.com)
Keoy, Soo Earn Seow, Tien Long
• Has considerable • Key industries specialization
professional experience in include: hospitality and
due diligence, valuation, leisure, healthcare,
market study, strategic value infrastructure assets , power
consulting, corporate generation, financial
governance advisory, institutions, consumer
franchising & licensing products, retail and services,
• Has over 20 years of • More than 12 years of
advisory and intellectual manufacturing, trading and
professional experience in financial advisory, public
asset management distribution.
the provision of auditing accounting and internal
advisory.
services, business, financial audit experience in
and accounting advisory Singapore and UK.
services.
Ryan, Izam Deloitte
• Izam is internally certified by Deloitte & Touche Financial Advisory Services
Deloitte as a project
manager and as a Lean Six 6 Shenton Way #32-00
Sigma professional. DBS Building Tower Two
• Izam’s professional
experience has been in Singapore 068 809
• An ICAEW Chartered serving clients operating in
Accountant, Izam has 6 technology, media,
years of post qualified telecommunications and Tel: +65 6224 8288
experience gained across financial services. Fax: +65 6538 6166
transaction advisory, audit
and in industry.
18 Growth Framework for SMEs – October 2012 © 2012 Deloitte & Touche Financial Advisory Services Pte Ltd

20. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate
and independent entity. Please see www.deloitte.com/sg/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms
in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business
challenges. Deloitte’s approximately 195,000 professionals are committed to becoming the standard of excellence.
About Deloitte Southeast Asia
Deloitte Southeast Asia Ltd—a member firm of Deloitte Touche Tohmatsu Limited comprising Deloitte practices operating in Brunei, Guam, Indonesia, Malaysia, Philippines,
Singapore, Thailand and Vietnam—was established to deliver measurable value to the particular demands of increasingly intra-regional and fast growing companies and
enterprises.
Comprising over 250 partners and 5,500 professionals in 22 office locations, the subsidiaries and affiliates of Deloitte Southeast Asia Ltd combine their technical expertise and deep
industry knowledge to deliver consistent high quality services to companies in the region. All services are provided through the individual country practices, their subsidiaries and
affiliates which are separate and independent legal entities.
About Deloitte Singapore
In Singapore, services are provided by Deloitte & Touche LLP and its subsidiaries and affiliates.
© 2012 Deloitte & Touche Financial Advisory Services Pte Ltd