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FINANCE FOR NON FINANCE -Executive and Below level.ppt
- 1. Finance for Non-Finance BY CMA JAYANT PIMPALGAONKAR B COM FCMA.
- 2. WORKSHOP OBJECTIVES ? Who are - finance person – ? Is accounts & finance different ? & various roles in finance ? Working capital management –how can every member contribute ? Capital cost management - how can every member better contribute ? Cost monetoring – how can every member contribute to better cash profit ? Budgeting – how build strong foundation for business growth ? Return on investment - how can every member contribute for growth ? Ratio analysis – how analysis by team can help organization grow ? Bench marking - against own previous achieved numbers- how matters ? Mis - financial numbers – how most helpful for - management ?
- 3. Are you a Finance Person? You cant change answer once given .
- 4. No , not at all. I am not a finance person boss
- 5. Yes I am a finance person.
- 6. Decisions impact Bottom line ? Lets take departments wise example –sales/HR /Purchase /Accounts/Admin – Thousands of examples .
- 7. Now I re-ask , Are You a finance person ? YES OR NO ?
- 8. Dangers- Not having Financial Knowledge ? Face challenge for taking financial decision. Not fully engaged . Over reliance on others . Lack of right questions . Non active participation in Management & other meetings . Try to hide behind others . May impact our growth in professional life .
- 9. Major concerns ? What to look out for and keep in mind! Planning, Problem-Solving and Decision Making What do businesses look for? Know what the numbers mean in compliance and operational context Accounting terminologies PAT/EBIT /PBT & Ratios- DSCR/CR/LR/INVENTORY TURNOVER . No appropriate Data Points and Backups as necessary Strategic Proposals How finance plays a role Capital Investment: How finance plays a role
- 10. Finance terms – Pbit /ebit Pat Pbt Gross profit Net profit Cash profit Working capital Positive & negative w capital
- 11. –Then how strong i am in basic finance fundamentals ? to : Contribute best for my company growth . To earn more & more promotions . Higher & higher salaries . Better manage /invest my earned saved salaries . Become financially free in my personal life & successful .
- 12. IS ACCOUNTS & FINANCE DIFFERENT ?.YES Accounting is recording –responsibility - accounts department . Finance –responsibility -all departments. Financial accounting –for external stake holders Management accounting –for internal stake holders.-Mis –all team our role here .
- 13. VERIOUS ROLES IN FINANCE Personal finance Business /corporate finance Public/government finance
- 14. NORMAL COMPANY GOALS ? .1-reduce costs 2-improve cash flow 3-increase profitability 4-liquidity 5-build net worth . 6-goodwill
- 15. How I am contributing in my company Cost & Financial Management ? Cost of Materials / Manpower/Machines Cost of Funds -( Money is involved in each element of Cost ) . How we are Capturing Inefficiencies - may be wastage of Materials , Time etc. Am I doing a COST BENEFIT ANALYSIS for my every activity ? If not done .
- 16. How we all have been collectively identifying & trying for reducing costs ?
- 17. Areas ……. Electricity – Interest Cost – avoiding delay in submitting stock statements , renewal etc Petrol , Diesel expenses in Vehicles used Communication expenses - Postage , Courier etc Printing & Stationery - Printouts on both sides of A4 paper Rent paid v/s space utilization Timely renewal of licenses to avoid unnecessary penalties Water wastage contd…
- 18. Telephone Expenses - Corporate plans , addl payments for ring tones / music etc Travelling Expenses – TA/DA – eg : Insurance Management of Stock – “stock = cash” NPAs
- 19. Types of Costs Direct cost /Direct Labor/ Standard Costs Incremental Costs Sunk Costs Relevant Costs Opportunity Costs Joint Costs/Overhead /Opportunity Cost / Operating Costs/ Selling Expenses /Prime Costs: DM + DL /Conversion Costs: DL+ Overhead Period Costs: Cost incurred during a period. Charged to revenue immediately within the year / Product Costs: Costs are charged to products upon sale of the product /Fixed Costs: Costs remain constant regardless of product activity Variable Costs: Costs change with respect to the activity being supported Semi-variable costs: Mixed Costs like a fixed costs + a variable component. Activity based cost .
- 20. Techniques for being cost competitive Structured review mechanism Budgetory control Root Cause Analysis-Ex-Manpower turnover
- 21. What is Finance ? Receipts Expenses Revenue Capital
- 22. What is Finance ? Personal finance – Income – expenses = savings Corporate /business finance – Sales –expenses = profit
- 23. ACCOUNTS & FINANCE IS VERY SIMPLE ? Write all transactions in chits and put in box Invoice –income Loan taken –liability Car-asset Dividend – income
- 24. Income /Profit & loss Statement Reports operating success or failure for a time period. Summarizes revenues and expenses for period: month, quarter,year.
- 25. Balance Sheet At specific date – one point in time! Assets = Liabilities + Stockholders’ Equity A common view is to reword to: Assets - Debts = Net Worth.
- 26. Assets Resources owned by the business Cash Accounts receivable Supplies Inventories Furniture and fixtures /equipment
- 27. Intangible Assets usually have long useful life Have no physical substance Examples: patents copyrights trademarks or trade names trademarks or trade names Franchise Goodwill.
- 28. Current Liabilities Obligations that are supposed to be paid within the coming year... accounts payable wages payable bank loans payable interest payable interest payable taxes payable current maturities of long- term bank loans payable
- 29. Liabilities Obligations or debts of business Accounts payable Interest payable Salaries payable Unearned revenue
- 30. Equity Ownership claims on assets Paid-in capital in capital Common stock Retained earnings
- 31. Long-Term Liabilities Debts expected to be paid after one year Examples… Bonds payable bonds payable Mortgages payable Obligations under employee pension plans
- 32. Contingent Liabilities Are events with uncertain outcomes. Lawsuits Must be recorded as a liability if: company can determine a reasonable estimate the company can determine a reasonable estimate of the expected loss and it is probable it will occur. Otherwise, mentioned in footnotes.
- 33. RATIO ANALYSIS
- 34. Statement of Cash Flows Provides information where a company gets cash and spends cash Summarizes for period: month, quarter, year. 3 groups: Cash from operating, investing, and financing activities.
- 35. Ratio Analysis Profitability Liquidity Return on Assets Ratio = Net Income /Assets .
- 36. BRAKE EVEN POINT
- 37. BALANCE SHEET
- 39. WHAT TO DO Every department must become a cost centre & Profit centre . All departments must sit in meeting to define cost centre ,Profit and the elements of cost sheets . All employees only drive the company
- 40. Accounting Process Transaction – Entry –Cash /Bank/Journal Ledger posting Trial Balance Profit & Loss A/c Balance Sheet Cash /Fund flow Ratio Analysis .
- 41. WORKING CAPITAL CYCLE ?
- 42. WORKING CAPITAL MANAGING ? Financial insolvency can result and lead to legal troubles, liquidation of assets and potential bankruptcy.
- 43. Who manage working Capital ? Working capital Cycle completion time ? Optimal cost Procurements &Inputs services? Services /Sale to clients /Customers – Quality of Services /Sales Receivables ? Actual Receipts – Optimal Payments / expenses –? Capital investments /Other than purpose funds are used . Again stocks –Procurements –
- 44. HOW ALL DEPARTMENTS CAN CONTRIBUTE FOR WC MGNT ? 1.Manage procurement and inventory/JIT-Purchase. 2. Pay vendors on time-to get best negotiated price offers in long term –Purchase & Accounts & sales . 3. Improve the receivables process-invoice sending time .- sales /service & operation & cash budgeting . Manage debtors effectively-resolving customer queries/complaints/issues/CR/DR Notes If cash is tied up in inventory /Assets or in unpaid invoices will have a huge effect on cash flow/WC.-So every department to speed up for their role completion .
- 45. How to develop KPI /MIS TO MANAGE WC ? No of days sales outstanding. No of days payables outstanding days inventory outstanding. Preparing & Managing every departmental Budgets every year is most required . Periodical expenses monitoring & comparison with Budgets required. We all only can ensure timely salaries. Atleast 50 % challenge we can solve.
- 46. SHORTAGE COST
- 47. WORKING CAPITAL Speed of transactions - most important
- 48. Benefits of Managing WC ? 1. Expansion of investment portfolio-Cheap source of finance for capital investment . 2. Increased profitability-saving of interest cost . 3. Ensure the availability of sufficient resources-stocks Improves overall efficiency of a company. Abnormal overheads control . Maintain good relation with suppliers and other creditors. Company Market repute increases .
- 50. YES!!! We all must practice cost competitiveness and thereby improve company profitability through Becoming a KASH generating team to achieve SMART goals and objectives of the business
- 51. THANKYOU