Finance accounts and budgets for non financial managers

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  • Finance & Accounting Seminars
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  • PDF Finance for Non-Finance Managers

PDF Finance for Non-Finance Managers

Finance, Accounts and Budgets for non-Financial
Managers
by
Gavin Julyan
+27 (0)82-412-7445
gavin@

Copyright ? 2007, Gavin Julyan Management Investments (Pty) Limited.
All rights reserved. This manual, or parts thereof, may not be reproduced in any
form without permission from the publisher; exceptions are made for brief excerpts
used in publishing reviews
Published by TOTeM Publishing,
a division of Gavin Julyan Management Investments (Pty) Limited.
PO Box 188, Petervale, 2151, South Africa
gavin@

This publication is designed to provide accurate and authoritative information with
regard to the subject matter covered, with the understanding that the publisher is
not engaged in rendering legal, accounting or other professional advice. If legal
advice or other expert assistance is required, the services of a competent
professional person should be sought.
Marketed and printed, with permission from the publisher, by CBM Training.
Table of Contents
Finance, Accounts and Budgets for non-Financial Managers ........................ 1
Planning and Managing a Business............................................................ 2
Planning a Business ....................................................................................2
The Concept Model...................................................................................2
Defining Product ......................................................................................2
Identifying Customers ..............................................................................3
Determining Resources .............................................................................3
Finding People .........................................................................................3
Calculating Cash ......................................................................................3
Managing a Business...................................................................................4
The Concept Model...................................................................................4
Managing Resources.................................................................................4
Controlling Product...................................................................................4
Pleasing Customers ..................................................................................5
Understanding Cash .................................................................................5
Guiding People ........................................................................................5
Cross Mentoring....................................................................................6
Succession Planning ..............................................................................6
A Brief Review of the Application and Interpretation of Financial
Statements ................................................................................................ 7
Interpreting Key Financial Statements ...........................................................7
The Balance Sheet ...................................................................................7
The Income/Profit and Loss Statement .......................................................7
The Cash-Flow Statement .........................................................................7
An Alternative Format for Financial Statements ..............................................7
The Latest Thinking on Budgeting and Forecasting ................................... 9
Understanding why the traditional budgetary process often fails .......................9
The latest thinking in preparing realistic, achievable budgets ......................... 10
Possible Sales Budget ............................................................................. 10
Scrapbook Budgeting ............................................................................. 11
Regular Budget Preparation and Amendment............................................. 11
Top down vs. Bottom up Budgeting .......................................................... 12
Zero-based Budgeting Re-visited ............................................................. 12
Building flexibility into a budget in order to minimise the impact of large
unforeseen expenses as well as having funds to take advantage of opportunities
.............................................................................................................. 12
Tools and techniques for monitoring and reviewing a budget.......................... 13
Aligning your Budgets and Forecast with your strategic intent ........................ 13
Creating both Medium and Long Term Value for your Organisation ......... 14
Investigating and understanding various options available for raising and
managing capital ...................................................................................... 14
Medium Term Options ............................................................................ 15
Mergers and Acquisitions...................................................................... 15
Investments ....................................................................................... 16
Financial/Equity Markets, Bonds and Financial Institutions........................ 16
Long Term Options................................................................................. 16
Options and Futures Markets ................................................................ 16
- i -
How `Exit Strategy" affects an organisations investment decisions .................. 16
Just Take It........................................................................................... 17
The Liquidation. ..................................................................................... 18
Selling to a Friendly Buyer. ..................................................................... 18
The Acquisition. ..................................................................................... 19
The IPO.(Independent Public Offering) ..................................................... 20
Using CAPM (Capital Asset Pricing Model) to determine risk and return for any
asset....................................................................................................... 22
Investigate cost reduction programs and predict their impact on profit and
business operation.................................................................................... 22
The Effect of Stock Reduction .................................................................. 23
Essential Methods for Measuring your Organisation's Financial
Performance ............................................................................................ 24
Choosing the appropriate performance management system.......................... 24
Examining the Balanced Scorecard Approach ............................................... 25
Assessing the Balance Sheet Approach to Valuation ...................................... 26
Using Financial Ratios to determine: Leverage, Liquidity, Gross and Net Profit
Margins, Return on Net Assets (RONA) and Equity (ROE)............................... 27
Leverage (or Gearing) Ratio .................................................................... 27
Liquidity Ratios ...................................................................................... 27
Quick Ratio ........................................................................................ 27
Acid Test............................................................................................ 28
Profit Margins ........................................................................................ 28
Gross Profit Percentage........................................................................ 28
Net Profit Percentage........................................................................... 28
RONA and ROE ...................................................................................... 29
Using Trend Analysis to anticipate and prepare for change in an organisation... 29
Key Performance Indicators (KPIs) for regular monitoring.............................. 29
Performing basic variance analysis.............................................................. 30
Conducting Break Even Analysis: An essential practice in order to avoid being
over-leveraged ......................................................................................... 30
Adopting a Strategic Approach to Financial Decision Making................... 31
Implementing a Value Based Management Strategy ...................................... 31
Considering the rate of return and the time value of money when making
financial decisions..................................................................................... 31
Developing a sound Financial Strategy that is in line with Corporate Governance
requirements ........................................................................................... 32
The latest developments in Tax Legislation & Financial Regulations - How will
they affect your organisation? .................................................................... 32
Finance and Technology: Easily increasing the range and quality of
information available for analysis ........................................................... 33
Is there a single software solution? ............................................................. 33
Tips, tools and techniques for Centralising, Accessing, Storing and Archiving Data
.............................................................................................................. 33
The `mobile' office environment: Why data portability and availability are both
crucial ..................................................................................................... 33
Data security/flexibility - How safe/easy is it to transfer information
electronically? .......................................................................................... 34
A Final Word ............................................................................................ 35
Elective Assignment ................................................................................ 36
Web Sites and email addresses referred to in this manual ...................... 37
- ii -
Web Sites ................................................................................................ 37
Email Addresses ....................................................................................... 37
Appendix ................................................................................................. 38
Example Balance Sheet ............................................................................. 39
Example Income Statement ....................................................................... 40
Example Cash Flow Statement ................................................................... 41
Financial Flow Diagram.............................................................................. 42
- iii -
Finance, Accounts and Budgets for non-Financial Managers
Copyright ? 2007, Gavin Julyan Management Investments (Pty) Limited
Finance, Accounts and Budgets for non-Financial
Managers
Not every person wants to be an accountant. Understanding finance is however a
very necessary skill, since performance in a corporate environment is measured
using the rules and formats of financial statements taught to accountants.
The purpose of this course is to establish common ground between financial
and non-financial people and encourage communication between these individuals.
For this communication to be successful, grounding in the basics of financial logic
and terminology, taught on this course, will remove some of the misunderstanding
caused by the variety of backgrounds, skills, experience and knowledge resident in
the individuals in any corporation.
In short, this course will allow you to begin talking to accountants without
turning you into an accountant.
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