Copy of Accounting and Financial Management.actual Auto Saved]

8/3/2019 Copy of Accounting and Financial Management.actual Auto Saved]

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ACCOUNTING AND FINANCIALACCOUNTING AND FINANCIAL

MANAGEMENTMANAGEMENT

PRESENTED BYPRESENTED BY

WILFRED OWALLAWILFRED OWALLA


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OVERALL OBJECTIVEOVERALL OBJECTIVE

TOTO UPSCALEUPSCALE CAPACITYCAPACITY TOTO EFFECTIVELYEFFECTIVELYAND AND EFFICIENTLYEFFICIENTLY MANAGEMANAGE BUSINESSBUSINESSINFORMATIONINFORMATION CENTRESCENTRES AND AND OFFEROFFER

BUSINESSBUSINESS DEVELOPMENTDEVELOPMENT SERVICESSERVICES

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MODULE OBJECTIVESMODULE OBJECTIVES

UPONUPON SUCCESSFULSUCCESSFUL COMPLETIONCOMPLETION THETHEPARTICIPANTSPARTICIPANTS SHOULDSHOULD BEBE ABLEABLE TOTO:: IDENTIFYIDENTIFY AND AND UNDERSTANDUNDERSTAND APPROPRIATEAPPROPRIATE

ACCOUNTING ACCOUNTING AND AND FINANCEFINANCE INFORMATIONINFORMATIONNECESSARYNECESSARY FORFOR EFFECTIVEEFFECTIVE BUSINESSBUSINESSINFORMATIONINFORMATION CENTRECENTRE OPERATIONSOPERATIONS

ENSUREENSURE THATTHAT THETHE APPROPRIATEAPPROPRIATE ACCOUNTINGACCOUNTING ANDANDFINANCEFINANCE INFORMATIONINFORMATION ISIS AVAILABLE AVAILABLE ININ THETHE

BUSINESSBUSINESS INFORMATIONINFORMATION CENTRESCENTRES COMMUNICATECOMMUNICATE MEANINGFULLYMEANINGFULLY WITHWITH MICROMICRO ANDANDSMALLSMALL ENTERPRISESENTERPRISES ININ THETHE LANGUAGELANGUAGE OFOFACCOUNTINGACCOUNTING ANDAND FINANCEFINANCE

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BUSINESS INFORMATIONBUSINESS INFORMATIONCENTRESCENTRES

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AccessAccess toto accurateaccurate andand upup toto datedate datadata andandrelevantrelevant financialfinancial informationinformation andand commercialcommercialintelligenceintelligence..

RightRight financialfinancial informationinformation andand intelligenceintelligence atatthethe rightright timetime..

BasingBasing businessbusiness decisionsdecisions onon soundsound financialfinancialcommercialcommercial intelligenceintelligence..

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PossiblePossible objectivesobjectives ofof BusinessBusinessInformationInformation CentersCenters includeinclude::

ResearchResearch onon keykey marketsmarkets includingincluding worldwideworldwidemarketmarket placesplaces

AccessAccess companycompany profilesprofiles worldwideworldwide

GetGet basicbasic guidanceguidance onon settingsetting upup licensing,licensing,agencies,agencies, distributorship,distributorship, andand otherother

agreementsagreements ResolveResolve manymany otherother businessbusiness problemsproblems andand

issuesissues

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Role of Accounting and Finance inRole of Accounting and Finance in

BICsBICs

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BICsBICs areare wherewhere smallsmall businessbusiness ownersowners cancanreceivereceive assistanceassistance andand adviceadvice.. ThoseThose

thinkingthinking ofof startingstarting aa businessbusiness shouldshould findfindBICsBICs anan excellentexcellent placeplace toto dodo researchresearch.. IfIfyouyou havehave anan existingexisting business,business, BICsBICs havehavemanymany resourcesresources toto assistassist inin thatthat businessbusiness toto

growgrow.. BICsBICs shouldshould thenthen bebe constantlyconstantlyaddingadding newnew resourcesresources toto serveserve thethe needsneeds ofoftheirtheir locallocal businessbusiness communitycommunity..

TheThe staffstaff inin thethe BICBIC shouldshould bebe trainedtrained staffstaff

whowho cancan suggestsuggest bestbest resourcesresources andanddemonstratedemonstrate howhow toto useuse thethe relevantrelevant datadatabasesbases andand offeroffer usefuluseful servicesservices..

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Division of BICDivision of BIC

Center for BusinessCenter for Business AllAll sortssorts ofof financialfinancial andand businessbusiness information,information,

statistics,statistics, guidesguides andand toolstools

Center for IndividualsCenter for Individuals Information for decision making and advisoryInformation for decision making and advisory

servicesservices

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CENTER FOR BUSINESSCENTER FOR BUSINESS

Acts of ParliamentActs of Parliament Bankruptcy ActBankruptcy Act Anti Corruption and Economic Crimes ActAnti Corruption and Economic Crimes Act

Companies ActCompanies Act Public Procurement and Disposal ActPublic Procurement and Disposal Act

Market Information and StatisticsMarket Information and Statistics Legal NoticesLegal Notices TaxesTaxes

Income Tax Act, VAT Act, Customs and Excise ActIncome Tax Act, VAT Act, Customs and Excise Act Tax ReturnsTax Returns Tax Documentation and FormsTax Documentation and Forms Taxpayers CharterTaxpayers Charter

Any other information relevant to business unitsAny other information relevant to business units 1010


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CENTER FOR INDIVIDUALSCENTER FOR INDIVIDUALS

Financial TemplatesFinancial Templates EE--CommerceCommerce Business SkillsBusiness Skills Financial Advisory ServicesFinancial Advisory Services

Operating ActivitiesOperating Activities Financial Planning and ForecastingFinancial Planning and Forecasting Cost Cutting and ReorganizationsCost Cutting and Reorganizations

Licensing and Business AgreementsLicensing and Business Agreements Risk ManagementRisk Management

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NATURE AND ENVIRONMENTNATURE AND ENVIRONMENTOF FINANCIAL ACCOUNTINGOF FINANCIAL ACCOUNTING

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What is Accounting?What is Accounting?

Accounting Accounting isis aa serviceservice activityactivity,,descriptive/analyticaldescriptive/analytical disciplinediscipline andand ananinformationinformation systemsystem..

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As As aa serviceservice activityactivity,, accountingaccountingprovidesprovides interestedinterested partiesparties withwith

quantitativequantitative financialfinancial informationinformation thatthathelpshelps themthem makemake decisionsdecisions aboutabout thethedeploymentdeployment andand useuse ofof resourcesresources inin

businessbusiness andand thethe economyeconomy..

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AsAs aa descriptive/analyticaldescriptive/analytical discipline,discipline,

itit identifiesidentifies thethe greatgreat massmass ofof eventsevents andandtransactionstransactions thatthat characterizecharacterize thetheeconomiceconomic activityactivity ofof anan entityentity and,and,throughthrough measurementmeasurement,, classificationclassification,, andandsummarizationsummarization,, reducesreduces thosethose datadata totorelativelyrelatively smallsmall highlyhighly significant,significant, andandinterrelatedinterrelated itemsitems thatthat whenwhen appropriatelyappropriatelyassembledassembled andand reportedreported,, describedescribe ananentitysentitys financialfinancial conditioncondition andand thethe resultsresultsofof operationsoperations..

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AsAs anan informationinformation system,system, itit collectscollects

economiceconomic informationinformation aboutabout anan entityentity andandcommunicatescommunicates thisthis informationinformation toto aa widewidevarietyvariety ofof personspersons whosewhose decisionsdecisions andandactionsactions areare relatedrelated toto thethe entityentity..

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Environmental Factors thatEnvironmental Factors that

influence Accountinginfluence AccountingAccountingAccounting recognizesrecognizes thatthat peoplepeople liveliveinin aa worldworld ofof scarcescarce resourcesresources.. BecauseBecause

resourcesresources existexist inin limitedlimited supply,supply, peoplepeople trytrytoto conserveconserve them,them, toto useuse themthem effectivelyeffectivelyandand efficientlyefficiently.. ForFor example,example, byby measuringmeasuringandand communicatingcommunicating thethe netnet incomeincome ofof andand

assetsassets employedemployed byby aa company,company, informationinformationthatthat isis helpfulhelpful inin determiningdetermining thethe companyscompanysefficiencyefficiency becomesbecomes availableavailable..

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Nature Of Financial AccountingNature Of Financial Accounting

TheThe disciplinediscipline ofof accountingaccounting isis commonlycommonlydivideddivided intointo financialfinancial accounting,accounting,managerialmanagerial (cost)(cost) accounting,accounting, taxtax

accounting,accounting, andand publicpublic sectorsector accountingaccounting..

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FinancialFinancial accountingaccounting hashas beenbeen

characterizedcharacterized asas that that branchbranch ofofaccountingaccounting concernedconcerned withwith thethe recording,recording,classification,classification, analysis,analysis, andand interpretationinterpretationofof thethe overalloverall financialfinancial positionposition andand

operatingoperating resultsresults ofof anan organizationorganization.. ItItencompassesencompasses thethe processprocess andand thethedecisionsdecisions thatthat culminateculminate inin thethepreparationpreparation ofof financialfinancial statementsstatements

relativerelative toto thethe businessbusiness asas aa wholewhole forfor thetheuseuse byby partiesparties internalinternal andand externalexternal toto thethebusinessbusiness..

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FinancialFinancial statementsstatements areare aa principalprincipal meansmeansthroughthrough whichwhich financialfinancial informationinformation isiscommunicatedcommunicated toto thosethose outsideoutside thethe entityentity..TheThe financialfinancial statementsstatements normallynormally

includeinclude::

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StatementStatement ofof FinancialFinancial PositionPosition

StatementStatement ofof ComprehensiveComprehensive IncomeIncome

StatementStatement ofof CashCash FlowsFlows

StatementStatement ofof ChangesChanges inin EquityEquity

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FINANCIAL STATEMENTSFINANCIAL STATEMENTS

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Qualitative Characteristics ofQualitative Characteristics of

Financial StatementsFinancial Statements

QualitativeQualitative characteristicscharacteristics areare attributesattributesthatthat makemake thethe informationinformation providedprovided inin thethefinancialfinancial statementsstatements usefuluseful toto usersusers..

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Four principal qualitative characteristics areFour principal qualitative characteristics are

UnderstandabilityUnderstandability RelevanceRelevance

ReliabilityReliability

ComparabilityComparability

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User NeedsUser Needs

Assessment of overall performanceAssessment of overall performance--In absolute termsIn absolute terms

--Compared to goalsCompared to goals--Compared to other entitiesCompared to other entities AssessmentAssessment ofof ManagementManagementQualityQuality

--Profits,Profits, overalloverall performance,performance, efficiencyefficiency

--StewardshipStewardship--EstimatingEstimating futurefuture prospectsprospects forfor profits,profits,

investmentinvestment andand capitalcapital needs,needs, etcetc

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AssessingAssessing financialfinancial strengthstrength andand stability,stability,

AssessingAssessing solvencysolvency

AssessingAssessing liquidityliquidity

AssessingAssessing riskrisk andand uncertaintyuncertainty

AsAs anan aidaid toto resourceresource allocationallocation byby

--OwnersOwners

--CreditorsCreditors--GovernmentsGovernments

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InIn makingmaking comparisonscomparisons

--WithWith pastpast performanceperformance

--WithWith otherother entitiesentities--WithWith industryindustry andand economyeconomy asas aa wholewhole

DeterminingDetermining compliancecompliance withwith lawslaws oror

regulationsregulations

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Statement of Financial PositionStatement of Financial Position

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Importance of Statement ofImportance of Statement of

Financial PositionFinancial Position

ProvidesProvides informationinformation aboutabout thethe naturenature andandamountsamounts ofof investmentsinvestments inin enterpriseenterpriseresourcesresources

EvaluatingEvaluating thethe capitalcapital structurestructure ofof thetheenterpriseenterprise

Assessing Assessing thethe liquidityliquidity andand financialfinancialflexibilityflexibility ofof thethe entityentity

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Format ForFormat For

Statement of Financial PositionStatement of Financial Position

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FORMAT FOR PREPARATION OF STATEMENT OF FINANCIALFORMAT FOR PREPARATION OF STATEMENT OF FINANCIALPOSITIONPOSITION

XYZ GROUPXYZ GROUP

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2010

2010 20092010 2009Kes'000Kes'000 Kes'000Kes'000

ASSETSASSETS

NonNon--current assetscurrent assets

Property, plant and equipmentProperty, plant and equipment XXXXXX XXX XXX

GoodwillGoodwill XXXXXX XXX XXX

Other intangible assetsOther intangible assets XXXXXX XXX XXX

Investments in associatesInvestments in associates XXXXXX XXX XXX

Current assetsCurrent assets

InventoriesInventories XXX XXX XXX XXX

Trade receivablesTrade receivables XXX XXX XXXXXX

Other current assetsOther current assets XXXXXX XXX XXX

Cash and cash equivalentsCash and cash equivalents XXXXXX XXX XXX

TOTAL ASSETSTOTAL ASSETS XXXXXX XXXXXX

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Equity and LiabilitiesEquity and Liabilities

Equity attributable to owners of the parentEquity attributable to owners of the parent

Share capitalShare capital XXXXXX XXX XXX

Retained earningsRetained earnings XXXXXX XXX XXXOther components of equityOther components of equity XXXXXX XXX XXX

Non controlling interestNon controlling interest XXXXXX XXX XXX

Total equityTotal equity XXXXXX XXX XXX

NonNon--current liabilitiescurrent liabilities

LongLong--term borrowingsterm borrowings XXXXXX XXX XXXDeferred taxDeferred tax XXXXXX XXX XXX

LongLong--term provisionsterm provisions XXXXXX XXX XXX

Total nonTotal non--current liabilitiescurrent liabilities XXXXXX XXX XXX

Current liabilitiesCurrent liabilities

Trade and other payablesTrade and other payables XXXXXX XXX XXXShortShort--term borrowingsterm borrowings XXXXXX XXX XXX

Current tax payableCurrent tax payable XXXXXX XXX XXX

ShortShort--term provisionsterm provisions XXXXXX XXX XXX

Total current liabilitiesTotal current liabilities XXXXXX XXX XXX

Total liabilitiesTotal liabilities XXXXXX XXX XXXTOTAL EQUITY AND LIABILITIESTOTAL EQUITY AND LIABILITIES XXXXXX XXXXXX

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Statement of ComprehensiveStatement of Comprehensive

IncomeIncome

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Importance of Statement ofImportance of Statement of

IncomeIncome

HelpsHelps toto evaluateevaluate pastpast performanceperformance

HelpsHelps toto determinedetermine thethe riskrisk associatedassociatedwithwith thethe enterpriseenterprise

CalculatingCalculating taxtax duedue

ObtainingObtaining loansloans fromfrom banksbanks oror otherothersourcessources

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Format forFormat for

Statement of ComprehensiveStatement of ComprehensiveIncomeIncome

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FORMAT FOR PREPARATION OF STATEMENT OFFORMAT FOR PREPARATION OF STATEMENT OFCOMPREHENSIVEINCOMECOMPREHENSIVEINCOME

XYZ GROUPXYZ GROUP

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDEDSTATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED31 DECEMBER 201031 DECEMBER 2010

20102010 20092009Kes 000Kes 000 Kes 000Kes 000

RevenueRevenue XXX XXX XXX XXX

Cost of salesCost of sales XXX XXX XXX XXX

Gross profitGross profit XXX XXX XXX XXX

Other incomesOther incomes XXX XXX XXX XXX

Distribution costsDistribution costs XXXXXX XXX XXX

Administrative expenses Administrative expenses XXXXXX XXX XXX

Other expensesOther expenses XXX XXX XXX XXX

Finance costsFinance costs XXX XXX XXX XXX

Profit before taxProfit before tax XXXXXX XXX XXX

TaxTax XXX XXX XXX XXX

XXXXXX XXX XXX

ProfitfortheyearProfitfortheyear XXXXXX XXXXXX

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Other Comprehensive Income:Other Comprehensive Income:

Exchange differences on translating foreign operationsExchange differences on translating foreign operationsXXXXXX XXX XXX

Cash flow hedgesCash flow hedges XXX XXX XXX XXXGains on property revaluationGains on property revaluation XXXXXX XXX XXX

Share of other comprehensive income from associateShare of other comprehensive income from associateXXXXXX XXX XXX

Actuarial gains/ (losses) on defined benefit fundActuarial gains/ (losses) on defined benefit fund

XXXXXX XXX XXXAvailable for sale financial assets Available for sale financial assets XXXXXX XXX XXX

Other comprehensive income for the yearOther comprehensive income for the year XXXXXX XXX XXX

TOTAL COMPREHENSIVE INCOME FOR THE YEARTOTAL COMPREHENSIVE INCOME FOR THE YEARXXXXXX XXXXXX

Attributableto:Attributableto:

Owners of the parentOwners of the parent XXX XXX XXX XXX

Non controlling interestNon controlling interest XXX XXX XXX XXX

XXXXXX XXX XXX

Earnings per shareEarnings per share XXX XXX XXX XXX

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Statement of Cash FlowsStatement of Cash Flows

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Purpose of the Statement of CashPurpose of the Statement of Cash

FlowsFlows TheThe primaryprimary purposepurpose ofof thethe statementstatement ofof

cashcash flowsflows isis toto provideprovide informationinformation aboutabout

cashcash receiptsreceipts andand cashcash paymentspayments ofof ananentityentity duringduring aa periodperiod..

TheThe secondarysecondary objectiveobjective isis toto provideprovide

informationinformation aboutabout operating,operating, investinginvestingandand financingfinancing activitiesactivities ofof thethe entityentityduringduring thethe periodperiod..

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These statements should enable users to:These statements should enable users to:

EvaluateEvaluate thethe liquidityliquidity andand solvencysolvency ofof ananenterpriseenterprise

AssessAssess thethe enterprisesenterprises abilityability toto generategeneratecashcash fromfrom internalinternal sources,sources, toto repayrepay debt,debt,toto makemake investments,investments, andand toto makemake

distributionsdistributions toto ownersowners..

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AUDITAUDIT

Internal AuditInternal Audit

External AuditExternal Audit

Final AuditFinal Audit

Performance Audit [Value for MoneyPerformance Audit [Value for MoneyAudit]Audit]

Management AuditManagement Audit

Fraud Investigations AuditFraud Investigations Audit

Forensic auditForensic audit4141


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GROUP WORKGROUP WORK

KimaniKimani YegoYego,, aa ruralrural farmer,farmer, hashascomecome toto youyou thatthat hehe investedinvested KesKes 11mm

lastlast yearyear inin fishfish farmingfarming andand doesdoes notnotseemseem toto bebe doingdoing wellwell..

HeHe desperatelydesperately needsneeds financialfinancial adviceadvice..

RequiredRequired::

AdviseAdvise KimaniKimani YegoYego

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BOOKKEEPINGBOOKKEEPING

Good record keepingGood record keeping

Keeping track of all expenses andKeeping track of all expenses and

revenuesrevenues

Keep proof of all expensesKeep proof of all expenses

Information about assetsInformation about assets

Keep all bank statementsKeep all bank statements

Records of all purchase and salesRecords of all purchase and salesinformationinformation

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REASONS FOR BOOKKEEPINGREASONS FOR BOOKKEEPING

Monitoring the success or failure of aMonitoring the success or failure of abusinessbusiness

Providing information needed to makeProviding information needed to makedecisionsdecisions

Obtaining bank financeObtaining bank finance Obtaining other sources of capitalObtaining other sources of capital

BudgetingBudgeting Preparing tax returnsPreparing tax returns Distributing profitsDistributing profits

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CONTROLSCONTROLS

General ControlsGeneral Controls Internal CheckInternal Check Segregation of DutiesSegregation of Duties DocumentationDocumentation Physical ControlsPhysical Controls AuthorizationAuthorization

Financial ControlsFinancial Controls BudgetingBudgeting ReconciliationsReconciliations Cash ManagementCash Management

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IMPROVEMENT OF BOOKKEEPINGIMPROVEMENT OF BOOKKEEPING

PROCESSPROCESS Hire PartHire Part--Time AccountantTime Accountant

Invest in Accounting SoftwareInvest in Accounting Software

Accounting Classes for EmployeeAccounting Classes for Employee

Employ an AccountantEmploy an Accountant

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FINANCIAL MANAGEMENTFINANCIAL MANAGEMENT

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SCOPE OF FINANCIALSCOPE OF FINANCIAL


FinancialFinancial ManagementManagement involvesinvolves thetheapplicationapplication ofof generalgeneral managementmanagementprinciplesprinciples toto particularparticular financialfinancial operationoperation

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OBJECTIVES OF FINANCIALOBJECTIVES OF FINANCIAL


AccountabilityAccountability toto stakeholdersstakeholders

ProperProper resourceresource managementmanagement

InternalInternal decisiondecision makingmaking

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RELATIONSHIP OF FINANCE TORELATIONSHIP OF FINANCE TO

ACCOUNTINGACCOUNTING TheThe primaryprimary objectiveobjective ofof accountingaccounting isis toto

measuremeasure thethe performanceperformance ofof thethe

enterprise,enterprise, assessassess itsits financialfinancial condition,condition,andand determinedetermine thethe basebase ofof taxtax paymentspayments..

TheThe principalprincipal goalgoal of of financialfinancial

managementmanagement isis toto createcreate ownerowner valuevalue bybyinvestinginvesting inin positivepositive presentpresent valuevalue projectsprojectsandand minimizingminimizing thethe costcost ofof financingfinancing

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TheThe accountingaccounting rolerole isis toto provideprovideconsistentlyconsistently developeddeveloped andand easilyeasily

interpretedinterpreted datadata aboutabout anan enterprisesenterprisespast,past, present,present, andand futurefuture operationsoperations

TheThe financefinance rolerole isis toto useuse thesethese datadata asas anan

importantimportant inputinput toto thethe decisiondecision makingmakingprocessprocess

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FINANCIAL PLANNINGFINANCIAL PLANNING

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FinancialFinancial planningplanning worksworks fromfrom thethestrategicstrategic andand businessbusiness plansplans toto identifyidentify

whatwhat financialfinancial resourcesresources areare neededneeded totoobtainobtain andand developdevelop thethe resourcesresources totoachieveachieve thethe goalsgoals inin thethe twotwo typestypes ofofplansplans.. Typically,Typically, financialfinancial planningplanning resultsresultsinin veryvery relevantrelevant andand realisticrealistic budgetsbudgets

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BUDGET MANAGEMENTBUDGET MANAGEMENT

Depicts what you spend and what youDepicts what you spend and what youearnearn

Useful for Planning FinancesUseful for Planning Finances

Tracking FinancesTracking Finances

Budgetary ControlBudgetary Control5454


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TYPES OF CONTROL SYSTEMSTYPES OF CONTROL SYSTEMS

FEEDBACK CONTROL SYSTEMFEEDBACK CONTROL SYSTEM Negative FeedbackNegative Feedback Positive FeedbackPositive Feedback

FEEDFOWARD CONTROL SYSTEMFEEDFOWARD CONTROL SYSTEM Cash BudgetCash Budget

VARIANCE ANALYSISVARIANCE ANALYSIS

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BUDGETING TECHNIQUESBUDGETING TECHNIQUES

IncrementalIncremental BudgetingBudgeting

ZeroZero BasedBased BudgetingBudgeting

ActivityActivity BasedBased BudgetingBudgeting

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Cash BudgetingCash Budgeting

AdvantagesAdvantages

EstimatingEstimating CashCash RequirementsRequirements

PlanningPlanning ShortShort TermTerm FinancingFinancing

SchedulingScheduling PaymentsPayments inin connectionconnection withwithCapitalCapital ExpenditureExpenditure ProjectsProjects

CheckingChecking TheThe Accuracy Accuracy ofof LongLong TermTermForecastsForecasts

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CASH MANAGEMENTCASH MANAGEMENT

CashCash flowflow statementstatement isis thethe mostmost importantimportant statementstatement PoorPoor cashcash managementmanagement isis thethe causecause ofof mostmost businessbusiness

failuresfailures

HelpsHelps planplan againstagainst unforeseenunforeseen businessbusiness eventualitieseventualities PositivePositive CashCash FlowFlow andand NegativeNegative CashCash FlowFlow ComponentsComponents::

OperatingOperating CashCash FlowsFlows InvestingInvesting CashCash FlowsFlows

FinancingFinancing CashCash FlowsFlows

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GOOD CASH FLOW MANAGEMENTGOOD CASH FLOW MANAGEMENT

KnowingKnowing when,when, where,where, andand howhow youryour cashcashneedsneeds willwill occuroccur

KnowingKnowing thethe bestbest sourcessources forfor meetingmeetingadditionaladditional cashcash needsneeds

BeingBeing preparedprepared toto meetmeet thesethese needsneeds whenwhen

theythey occur,occur, byby keepingkeeping goodgood relationshipsrelationshipswithwith bankersbankers andand otherother creditorscreditors

DevelopDevelop cashcash flowflow projectionsprojections

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IMPROVING CASH FLOWSIMPROVING CASH FLOWS

ManageManage PayablesPayables ControlControl CostsCosts OrganizeOrganize BillingBilling ScheduleSchedule

CollectCollect DebtsDebts PromptlyPromptly TakeTake AdvantageAdvantage ofof EarlyEarly PaymentPayment IncentivesIncentives DontDont BuyBuy allall inin oneone PlacePlace TightenTighten youryour InventoryInventory

FormForm buyingbuying cooperativescooperatives CheckCheck youryour pricingpricing ConsiderConsider leasingleasing

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FINANCIAL STATEMENTFINANCIAL STATEMENTANALYSISANALYSIS

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Importance of Financial StatementImportance of Financial Statement

AnalysisAnalysisTheThe figuresfigures inin thethe financialfinancial statementsstatements arearerarelyrarely significantsignificant oror importantimportant inin

themselvesthemselves.. ItIt isis theirtheir relationshipsrelationships totootherother quantities,quantities, amountsamounts andand directiondirection ofofchangechange fromfrom oneone pointpoint inin timetime toto anotheranother

thatthat isis importantimportant.. FinancialFinancial statementstatementanalysisanalysis thusthus involvesinvolves significantsignificantrelationshipsrelationships..

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BICsBICs cancan createcreate relationshipsrelationships toto helphelpbusinessesbusinesses runrun smoothly,smoothly, makingmaking suresure

theythey dodo whatwhat isis necessarynecessary toto increaseincreaseprofitsprofits.. ThisThis cancan bebe donedone byby helpinghelping themthemrecordrecord andand interpretinterpret financialfinancial datadata toto makemakebetterbetter decisionsdecisions

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COMMON ANALYTICALCOMMON ANALYTICAL

TECHNIQUESTECHNIQUES FinancialFinancial RatioRatio AnalysisAnalysis

TrendTrend AnalysisAnalysis

KeyKey PerformancePerformance IndicatorsIndicators ComparableComparable BenchmarkingBenchmarking

IndustryIndustry

LifecycleLifecycle stagestagePeerPeer firmsfirms

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EE

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WORKING CAPITAL MANAGEMENTWORKING CAPITAL MANAGEMENT

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IMPORTANCEIMPORTANCE

InvestmentInvestment inin currentcurrent assetsassets representsrepresents aa

substantialsubstantial portionportion ofof totaltotal assetsassets InvestmentsInvestments inin currentcurrent assetsassets andand thethe

levellevel ofof currentcurrent liabilitiesliabilities havehave toto bebe

gearedgeared quicklyquickly toto changeschanges inin salessales

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FACTORS INFLUENCING WORKING CAPITALFACTORS INFLUENCING WORKING CAPITALREQUIREMENTSREQUIREMENTS

NatureNature ofof businessbusiness

SeasonalitySeasonality ofof operationsoperations

MarketMarket conditionsconditions

ProductionProduction policypolicy

ConditionsConditions ofof supplysupply

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INVENTORY MANAGEMENTINVENTORY MANAGEMENT

As with other investments, the costs ofAs with other investments, the costs ofholding stock must be related to the benefitsholding stock must be related to the benefitsto be gained.to be gained.

Stock costs are inclusive of:Stock costs are inclusive of:Costs of Holding StockCosts of Holding Stock Interest on capital invested in stockInterest on capital invested in stock Storage chargesStorage charges

Handling costsHandling costs Insurance and securityInsurance and security Pilferage, vermin damage, etcPilferage, vermin damage, etc

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Costsof Obtaining StockCostsof Obtaining Stock Clerical and administrative costs associatedClerical and administrative costs associated

with purchasingwith purchasing

Transport costsTransport costs

Stock Out CostsStock Out Costs

Loss of customer goodwillLoss of customer goodwill Loss of future sales because customers goLoss of future sales because customers goelsewhereelsewhere

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InventoryManagementInventoryManagementT

echniq

uesT

echniq

ues

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REORDER LEVEL SYSTEMREORDER LEVEL SYSTEM

AlsoAlso knownknown asas thethe twotwo binbin systemsystem..

AA predeterminedpredetermined reorderreorder levellevel isis setset forforeacheach itemitem

WhenWhen stockstock levellevel fallsfalls toto thethe reorderreorder level,level,

aa replenishmentreplenishment orderorder isis issuedissued.. TheThe replenishmentreplenishment orderorder isis thethe EOQEOQ..

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PERIODIC REVIEW SYSTEMPERIODIC REVIEW SYSTEM

StockStock levelslevels areare reviewedreviewed atat fixedfixed

intervals,intervals, ee..gg.. everyevery fortnightfortnight.. TheThe quantityquantity ofof thethe replenishmentreplenishment orderorder isis

notnot aa previouslypreviously calculatedcalculated EOQEOQ butbut isis

basedbased onon thethe likelylikely demanddemand untiluntil thethe nextnextreviewreview..

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