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Finance Skills For Purchasing and Procurement Officers

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Finance For Non Finance Managers, Business Finance For Buyers- by www.businessservicessupport.com

This course teaches procurement officers finance skills to enable them to evaluate the financial fitness of their suppliers. Visit our website to find out more about our traiing courses on Finance For Non Finance Managers For Purchasers

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Finance Skills For Purchasing and Procurement Officers

  1. 1. B USINESS F INANCE F OR N ONF INANCE M ANAGERS - I NP ROCUREMENT www.businessservicessupport.com
  2. 2. K EY O BJECTIVES The essence of financial probity in procurement How financial statements are put together How to interpret financial statements, robustly to identify risks and make sound decisions Introduction to basic forecasting techniques, cost accounting and financial planning 2 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  3. 3. F INANCIAL P ROBITY I N P ROCUREMENT The key to financial probity is to radically eliminate risks exposure to your organisation Such risks can take the form of insolvency, liquidity shortage, delivery delays, bad publicity which could spiral into financial loss for your organisation Procurement processes should inherently manage such risk through due diligence that test viability and financial strengths of critical suppliers of high value contracts. 3 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  4. 4. A SSESSING S UPPLIER ’ S F INANCIAL S TRENGTHS & S YSTEMSWhat Makes a Sound Financial ManagementSystem? Book-Keeping Financial Procedures & Controls Budgeting & Management Accounts Cashflow Planning & Monitoring Auditing or Independent Examination of Financial Statements Financial Evaluation Timely Production of Financial Statements 4 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  5. 5. C OMMON F INANCIAL S TATEMENTSUNDERSTANDING FINANCIAL STATEMENTSThree Types of Financial Statements:  Profit and loss accounts (Income and expenditure accounts)  Balance Sheet  Cashflow StatementsInternal & External Financial Statements:  Management Accounts & Balance Sheet  Annual Audited AccountsWe will cover management accounts later. 5 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  6. 6. T HE D YNAMIC O F F INANCIAL S TATEMENTS ILLUSTRATED GET TING TO GRIPS WITH ACCOUNTING TERMINOLOGIESPROFIT & LOSS ACCOUNTS/INCOME & EXPENDITURE ACCOUNTS EXPENDITURE: Salaries TURNOVER: Rent/Rate Sales Income Utilities Insurance Depreciation FINANCED BY: ASSETS: Capital Fixed Assets Shares Office Building Accumulated ProfitsFixtures/ Fittings/ Equipment Liabilities Current Assets Current Liabilities Trade Creditors Cash/ Debtors Short term Investments Long Term Liabilities Bank Loans BALANCE SHEET 6 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  7. 7. T HE L ANGUAGE O F F INANCE – W HAT B UYERS N EED T O K NOWGetting to grips with financial terminologylets define them now Assets - Cash, Debtors, Stock Inventory, Land, Buildings, Equipment, Furniture Liabilities - Trade creditors, Mortgage Payable Revenue - Sales income Capital - shares, accumulated profit Expenses - salaries, rents, utilities, rates Depreciation Fixed Assets Current Assets 7 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  8. 8. A CCOUNTING , PRODUCING AND EVALUATING FINANCIAL STATEMENTSGetting to Grips with Financial Terminology Profit and Accrual Balance Cash flow Prepayment Loss Overheads Principle Sheet statement Accounts 8 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  9. 9. I NTERPRETING F INANCIAL S TATEMENTS Profit & Loss Account for the year 1st January 2004 – 31st December 2010 Sales (Turnover) £ 30,000 Cost of sales £ (15,000) Gross profit £ 15,000 Overheads £ (12000) Operating profits £ 3,000 Bank interest & other expenses £ (1,000) Net profit £ 2,000 Tax £ (1,000) Net profit after tax £ 1,000 9 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  10. 10. I NTERPRETING F INANCIAL S TATEMENTS Balance Sheet as at 31st December 2010 Land and Building £ 15,000 Computers & Equipments £ 5,000 Current Assets £ 20,000 Debtors £ 5,000 Stocks £ 5,000 Cash at bank £ 15,000 Current Liabilities £ 25,000 Trade Creditors £ (5,000) Net current assets £ 20,000 Long term creditors £ 20,000 Outstanding Loans £ (10,000) Net Worth £ 30,000 Capital and Reserves £ Ordinary share capital £ 5,000 Accumulated Reserves £ 25,000 Net Worth £ 30,000 10 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  11. 11. E VALUATING S UPPLIER ’ S F INANCIAL S TATEMENTS What is financial evaluation and why evaluate yourfinancial statements? Understanding financial risks and how financialevaluation helps in risk management 11 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  12. 12. E VALUATING F INANCIAL S TATEMENTSKey Financial Ratios: Gross Profit Margin = gross profit divided by turnover x100 Net Profit Margin = net profit divided by turnover x 100 Turnover Growth = current yrs turnover minus last yrs turnover divided last yrs turnover x 100 Expenditure Growth = current yrs expenses minus last yrs expenses divided last yrs expenses x 100 Working Capital = current assets divided current liabilities x 100 Gearing = loans divided loans plus other capital invested (equity and grants) x 100 12 COPYRIGHT© TO BUSINESS SERVICES SUPPORT LIMITED 2011
  • muntas24

    Apr. 23, 2014

Finance For Non Finance Managers, Business Finance For Buyers- by www.businessservicessupport.com This course teaches procurement officers finance skills to enable them to evaluate the financial fitness of their suppliers. Visit our website to find out more about our traiing courses on Finance For Non Finance Managers For Purchasers

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