Finance For Non-Financial Personnel Part 8
Business Driven Finance Insights For Laymen
Decision
Making
£ ¥ € ₳ ₨$
The Structure of Finance
For Non-Financial Personnel
educational: free distribution
8 presentations altogether,...
£ ¥ € ₳ ₨$
Decision Making
… the toughest of all ...
educational: free distribution
£ ¥ € ₳ ₨$
How People
Make Decision?
educational: free distribution
Values &
Beliefs
Emotion
Ego
Understanding
Personality...
£ ¥ € ₳ ₨$
How People
Make Decision?
educational: free distribution
Values &
Beliefs
Emotion
Ego
Understanding
Personality...
£ ¥ € ₳ ₨$
How People
Make Decision?
educational: free distribution
Values &
Beliefs
Emotion
Ego
Understanding
Personality...
£ ¥ € ₳ ₨$
How People
Make Decision?
educational: free distribution
Decision is effected through
INDIVIDUAL or GROUP
The Q...
£ ¥ € ₳ ₨$
Decision Versus Action Versus Result
educational: free distribution
Note: The complete decision making module i...
£ ¥ € ₳ ₨$
Example 1: Should we shut down a food outlet?
educational: free distribution
Background:
A food outlet with cap...
£ ¥ € ₳ ₨$
educational: free distribution
Example 1: Should we shut down a food outlet?
Break-even = 501
customers, but ca...
£ ¥ € ₳ ₨$
educational: free distribution
Example 1: Should we shut down a food outlet?
Break-even = 501
customers, but ca...
£ ¥ € ₳ ₨$
educational: free distribution
Example 1: Should we shut down a food outlet?
Break-even = 501
customers, but ca...
£ ¥ € ₳ ₨$
educational: free distribution
Example 1: Should we shut down a food outlet?
Break-even = 501
customers, but ca...
£ ¥ € ₳ ₨$
Example 2: What I need to do to my project?
educational: free distribution
Background:
Product XYZ development ...
£ ¥ € ₳ ₨$
Example 2: What I need to do to my project?
educational: free distribution
Management
Team
Management
Team
Left...
£ ¥ € ₳ ₨$
Example 2: What I need to do to my project?
educational: free distribution
Management
Team
Management
Team
Left...
£ ¥ € ₳ ₨$
Example 2: What I need to do to my project?
educational: free distribution
Management
Team
Management
Team
Prop...
£ ¥ € ₳ ₨$
● We make decisions everyday and everytime.
● Financial information is critical for decision making
● You also ...
£ ¥ € ₳ ₨$
educational: free distribution
1. Work with accountant to obtain the financial numbers you want.
2. Financial k...
£ ¥ € ₳ ₨$
educational: free distribution
care@3cthinktank.com
3CTT is a management consultant who advise and run projects...
Próxima SlideShare
Cargando en…5
×

Finance for non financial personnel - part 8

825 visualizaciones

Publicado el

Many non-financial personnel find finance is mystical and somehow cannot comprehend financial information.

The 8 parts of the presentation are designed to help the non-financial personnel to look at finance from their own view point. Instead of learn finance from finance perspective, we learn our own perspective.

This is because your goal is to improve your current work not to become a qualified accountant. Crash courses usually can’t provide sufficient knowledge for you to understand finance.

Designed from business’s viewpoint, different from other approaches found in the market. Hopefully, we can equip non-financial personnel with business driven financial knowledge.

By end of the 8 presentation:
1. You can create your value to increase financial value
2. You can interpret financial reports to make decisions
3. You know how to work on budget
4.You can propose your ideas in terms of dollars & cents
5. You produce the financial numbers that your boss likes
6. You can communicate well with finance department
7. You make collaboration with accountant possible instead of just for the sake of formality

Publicado en: Empresariales
  • Sé el primero en comentar

Finance for non financial personnel - part 8

  1. 1. Finance For Non-Financial Personnel Part 8 Business Driven Finance Insights For Laymen Decision Making
  2. 2. £ ¥ € ₳ ₨$ 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.
  3. 3. £ ¥ € ₳ ₨$ Decision Making … the toughest of all ... educational: free distribution
  4. 4. £ ¥ € ₳ ₨$ How People Make Decision? educational: free distribution 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.
  5. 5. £ ¥ € ₳ ₨$ How People Make Decision? educational: free distribution 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. 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.
  6. 6. £ ¥ € ₳ ₨$ How People Make Decision? educational: free distribution 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 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.
  7. 7. £ ¥ € ₳ ₨$ How People Make Decision? educational: free distribution 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. 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.
  8. 8. £ ¥ € ₳ ₨$ Decision Versus Action Versus Result educational: free distribution 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. 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?
  9. 9. £ ¥ € ₳ ₨$ Example 1: Should we shut down a food outlet? educational: free distribution 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 ($) 109,091 8 Cash Operating Cycle 30 days 18 Break-even point (customer) 15,022 9 Table Turnover rate 9 times 19 Break-even point (customer)/Day 501 10 Sales/Table/Day 196 20 Break-even point (Table Turnover)/ Day 10
  10. 10. £ ¥ € ₳ ₨$ educational: free distribution Example 1: Should we shut down a food outlet? 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 $10k Manage possible impact on existing customers Check viability about market, process, and food quality for sustainable business model. Management Team Let finance conduct a “what-if” for underperform sales
  11. 11. £ ¥ € ₳ ₨$ educational: free distribution Example 1: Should we shut down a food outlet? 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. 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 Increase take-away sales Increase corporate sales Enhance credit control Increase overheads by $10k Manage possible impact on existing customers Check viability about market, process, and food quality for sustainable business model. Management Team Let finance conduct a “what-if” for underperform sales Looks positive here!
  12. 12. £ ¥ € ₳ ₨$ educational: free distribution Example 1: Should we shut down a food outlet? 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. 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 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 If Implement Strategy: Sales= $150k GP = $90k Overhead = $70k Net Profit = $20k Net Cash fm GP = $60 Headcount = 12 Free cash fm GP = $45 Current Ratio = 2:1 (higher credit risk) We don’t do take-away, will this affects our image? I think we need an alternate route for overheads
  13. 13. £ ¥ € ₳ ₨$ educational: free distribution Example 1: Should we shut down a food outlet? 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. 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? 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 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 Shutdown outlet, reduce free cash from GP to $20k Continue without change, free cash from GP remain at $30k
  14. 14. £ ¥ € ₳ ₨$ Example 2: What I need to do to my project? educational: free distribution 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 -$15k
  15. 15. £ ¥ € ₳ ₨$ Example 2: What I need to do to my project? educational: free distribution 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 $350k development costs and achieved 1% of total revenue. This is 5% behind target and free cash flow still negative. Will the manageme nt cease the project? Product XYZ development is too slow & cannot achieve market requirements + financial targets. It is underperforming, how can we improve it? What are the key improvement areas we are looking for? Should we change the way we review ideas to speed up feedback? Can use 3rd parties engines to build our features to reduce the need of testing and speed up development. Customers will not notice the different so easily. Cost of development may be lesser but cost of sales will increase by 5%, more sales need to achieve.
  16. 16. £ ¥ € ₳ ₨$ Example 2: What I need to do to my project? educational: free distribution 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 $350k development costs and achieved 1% of total revenue. This is 5% behind target and free cash flow still negative. Will the manageme nt cease the project? Product XYZ development is too slow & cannot achieve market requirements + financial targets. It is underperforming, how can we improve it? What are the key improvement areas we are looking for? Should we change the way we review ideas to speed up feedback? Will 3rd parties products affects our brand? Can use 3rd parties engines to build our features to reduce the need of testing and speed up development. Customers will not notice the different so easily. Cost of development may be lesser but cost of sales will increase by 5%, more sales need to achieve. Market is expecting new features in this release. I rather push the date for release then Propose use 3rd parties products to reduce R&D time Good idea, provided the management don’t respond to our idea so slow
  17. 17. £ ¥ € ₳ ₨$ Example 2: What I need to do to my project? educational: free distribution 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) = $300k Sales on new product/ Total = 2% Cash conversion rate (L/T) = 15% This can solve temporarily problem. In L/T challenge - we face 3rd parties’ qualities + integration issues. The management team does not know this Marketing activities need to adjust this. We need to take note of cash flow burden We need to track customers’ reaction + the pace of sales growth
  18. 18. £ ¥ € ₳ ₨$ ● 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. educational: free distribution Are You On Track? Last Overview Presentation On Finance For Non-Financial Personnel. Business Driven Finance Insights For Laymen
  19. 19. £ ¥ € ₳ ₨$ educational: free distribution 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
  20. 20. £ ¥ € ₳ ₨$ educational: free distribution 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.

×