Account, Principles & Procedures / Business Planning Flashcards
What do a Public Limited Companies Accounts include?
- Chairmans Statement
- Independent Auditors Report
- Income statement (P&L)
- Statement of financial poisition (Balance Sheet)
- Corporate governance Report
- Renumeration Report
- Other statutory information
What is a Profit & Loss Account?
Income Statement
summary of the business’ income and expenditure transactions (prepared annually)
What are management accounts?
For internal use only - NOT AUDITED
Who prepares audited accounts?
A chartered accountant
What is a cash flow statment?
Shows all the actual receipts and expenditure to include VAT
What is a Balance Sheet?
A statement of a business’ financial position showing its assets and liabilities at a given date (usually year end)
What are Assets?
Cash
Property
Debtors
Other Investments
What are liabilities?
Borrowings
Loans
Overdrafts
Creditors
Obligation to Pay Rent
What is the importance accountancy change impacting property liabilities?
International Financial Reporting Standard 16 (Lease accounting standard)
Full costs of leases must be accounted for on balance sheet
Which leases are exempt from balance sheet?
Leases of 12 months or shorter
What are the key factors of business planning?
- Analysis of opportunities and risks for the business
- The resources required to service clients
What tools can be used in business planning?
SWOT
Fee forcasting
How can a firm ensure the correct allocation fo resources and spending?
Budgets, Cash flows and financial audit controls
What are the different forms of business vehicles?
Sole Practioner
LLP
Limited Company
PLC
What is an LLP?
Partners liability is limited (not responsible for others negligence)
What is a Limited company?
Responsible for debt to extent of capital invested (limited liability)
What is a PLC?
Shares offered to public
What is CBRE’s Business plan?
Short term: Increase attachement rate across the business
Long term: Increase DE&I initiatives
How can you determin tenant covenant strength?
Experian or D&B reports
What is an Experian Report?
Gives indication of covenant strength by giving credit score out of 999
What is a D&B report?
Provides a Financial Strength indicator (Best =5A)
Score of 1-100 based on business history, payment habits and industry norms
Calculate: Return on Capital Employed (ROCE)
Operating profit / Capital
Calculate: Current Ratio
Current Assets / Current Liabilities
Calculate: Profit Margin
Profit / Revenue
Calculate: Gearing Ratio
Debt / Equity
how can a business monitor its performance?
KPIs
Collect & analyse data
Informed decision making
how can a firm market its business over short and long term?
Short: promotional campaigns, socials, limited time offers
Long term: build brand awareness, customer relationship management
What are CBREs corporate objectives?
CBRE is a PLC, so first and foremost is to be profit making for it’s shareholders.
As a wider business, in the medium term for example – CBRE have the ‘One Team’ approach, which encourages Diversity and Inclusion – as well as business line cross pollination.
The UK and I part of the business also have wider objectives such as to be operating as net zero by 2040, increasing diversity, increasing collaboration.
What are CBREs core values?
Respect, Integrity, Service, Excellence
How does your firm market it’s business over the short, medium and long-term?
Short = pitching directly on sales
Medium = Promotion of the business e.g. through social media
Long = Meeting and nurturing client relationships
What are the key elements of a business plan?
Executive summary
Market Analysis
Financial Projections
Operational Plan eg SWOT
What are the key elements of the RICS Business Planning and Accounting Principles and Procedures?
Budgeting is important for resource allocation and must be realistic and achievable
Forecasting is important for businesses to plan for future events
Financial analysis can help to identify areas where the business can improve
How would a business plan to ensure objectives are met / what are the key inclusions?
A SWOT analysis – target key areas of growth, and address potential weaknesses
Fee Forecasts
Budgets, cash flows and financial/audit controls
How can a business monitor performance and use management tools to track progress?
· A SWOT analysis can be a useful tool to use – understand its merits and opportunities and risks of the business and the resources required to service clients
Fee forecasts - to plan future activities, ensure hit minimum profit margin
Budgets, cash flows and financial/audit controls are important to ensure the correct allocation of resources and expenditure
How would a business plan alter for individual, departmental and company? As well as for different forms of business vehicle?
Individual = specific to the person, e.g. fees, referrals etc.
Departmental = needs to reflect the department and consider wider costs and pressures e.g. across sectors - e.g. targeting profit over a quarter
Company wide = again, encapsulate wider factors that are impacting all service lines, wider issues – could target profit say over the year sole practitioner, partnership, LLP, limited company and PLC
When have you used/made a business plan within a team or department?
Before every Fund quarterly meeting –used SWOT analysis to find out what to include in the presentation
Why is fee forecasting important?
Assess whether the company is going to be in reasonable profit and if not, what then what resources are required to address this
Examples of Busines planning activities in your CPD?
CEO update calls – wider company performance, including share price
Departmental – SWOT analysis, fee forecasts and performance against targets
What is the role of SWOT analysis?
Analyse the strengths/weaknesses/opportunities/threats and therefore assess where best to allocate resources in the company and address potential issues
In what ways can a business evaluate its progress?
Track against forecasts
Track against competition and any benchmarkable indices
Tell me about your involvement with business planning?
I have been involved in business planning within my team, by regularly reviewing our financial target for the year and establishing current and future instructions that will contribute to it
What are the corporate objectives of your firm?
Net Zero by 2050, increase D&I, enterprise 25 – big investment drive
How do you work towards CBRE’s goals in your role?
I ensure that I meet the values of my firm in my everyday work such as upholding ethics and working effectively as a team. For example, I work closely on projects with my supervisor and partners
How can an up-to-date business plan help an organisation in the current economic climate?
An up to date business plan is crucial in the current climate due to recovery from covid-19 and increased in costs of build costs the pressures on businesses. Having a current business plan ensures that business is meeting their short- and long-term objectives.
How do you use networking to further your business planning skills?
Networking allows for discussions and knowledge sharing within and outside your firm in a less formal environment.
Why is relationship building important for your role?
Real estate is a people business and we heavily rely on being able to network and meet new people. It can help us and our clients, by referring our clients to various teams in the business if we believe they can help achieve the clients objectives.
Can you tell me about when you have used a SWOT in your role?
I have used them in business planing/pricing reports to analyse the property and the properties market to highlight to the client any risks and opportunities might be encountered and discuss possible investment strategies
What insurance types have you dealt with and what risks have they protected against?
PII – protects against negligence claims
Explain the objectives of the RICS Covid-19 Recovery Business Plan?
Focus on priority markets and sectors
Contribute to ESG
Modernise Culture
What is business continuity and why is it important?
Having a plan to deal with difficult situations
How do you cross sell and why is it important?
Cross selling is the opportunity to introduce other business lines to your existing client
Is cross selling ethical?
If it in best interest of client
How would you keep track of your business performance?
KPIs
Quarterly Management meetings
Debt Control
KF is an LLP. What does that mean?
An LLP has partners who hold ownership of the LLP and also hold powers to manage.
What is a PLC?
In a PLC company, the shareholders (owners) do not necessarily have to have management powers.
Who owns KF?
The partners in the company
What is a limited company?
A limited company is a type of business structure whereby a company is considered a legally distinct body
What is a sole practitioner?
A professional who practices independently
How would you set up in practice?
Establish the business activity
Carry out a SWOT
Identify where fees will be coming from
Identify whether you need client accounts
Put KPIs in place
Ensure staffing is budgeted for
Conduct monthly reviews of business performance
How have business plan adapted to cope with the pandemic
Focusing on short time goals and ensuring that KPIs are met
How would you set up an RICS firm?
Must register with RICS if 50% of the principles are MRICS
There is the option if 25% or more are MRICS
Annually reviewing complicance with RICS obligations
Types of business and staffing details
statutory regulated activities
Nature of clients
Complaints handling procedure details and records
PII
Whether the firm holds client’s money
What is included in a public limited company’s accounts?
- Chairmans Statement
- Independent Auditors Report
- Income statement (P&L)
- Statement of financial poisition (Balance Sheet)
- Corporate governance Report
- Renumeration Report
- Other statutory information
What accounting principles do you know of?
IFRS – international financial reporting standards
UKGAAP – body of accounting standards for accounting
What are the key differences between management and statutory accounts?
Management accounts = prepared for internal use only by a businesses and are not audited
Statutory accounts = also known as annual accounts or financial statements, are formal documents that summarize a company’s financial transactions – in accordance with legal requirements
Difference between UKGAAP and IFRS?
Different sets of accounting standards that can apply to the UK:
IFRS – international financial reporting standards
UKGAAP – body of accounting standards for accounting (based on FRs 102, simplified IFRS)
What is IFRS 16?
IFRS13 = fair value requirements
IFRS 16 = is all the lease accounting standards with which companies have to comply with when using International Financial Reporting Standards (IFRS). The full cost of leases have to be accounted for on the balance sheet
How does Experian assess company’s covenant?
The Experian Rating works on a scale of 1-100 and predicts the likelihood that a business’s payment performance will become seriously delinquent or that the business will go bankrupt – looks at total assets and liabilities, profit, direction of performance etc.
What are the issues with Experian?
There is a lack of transparency for how the score is calculated.
What are other methods of assessment?
Profits method – profits should be 3 x a companies annual liabilities
What advice can you give / when do you need to refer?
Can give advice on the investment market perception of the covenant – caveating I am not qualified to give financial advice. Any detailed analysis I would need to refer
What is the difference between managed and audited accounts?
Management accounts = prepared for internal use only by a businesses and are not audited
Audited accounts = prepared by a Chartered or Certified Accountant
What are the key differences between income statements and statements of financial position?
Statement of financial position = e.g. balance sheet, showing its assets and liabilities at a given date, usually at the end of a financial year
Income statement = e.g. Profit and loss account = summary of a businesses income and expenditure transactions, prepared usually on an annual basis
What is a cash flow statement?
cash flow statement = shows all the actual receipts and expenditure to include VAT over a set period
Have there been any recent accountancy changes in relation to the profession?
Changes regarding IFRS 16 = impact on how occupiers regard their property liabilities. An occupiers obligation to pay rent has to be recognised as a liability. Exemptions exist for leases of 12 months or later
Are you competent to comment on Tenant covenant strengths?
I use covenant strength to guide my opinion on yields and can give advice on the markets perception of the covenant, however I am not a chartered accountant nor qualified to read financial accounts.
Explain your use of an Experian or a D&B Report.
I have used both in valuation reports to assess the covenant strength of a tenant.
What is the INCANs software?
This helps monitor, report and predict the likelihood tenants will default on their lease obligations
What are the differences between Experian & D&B?
D&B – looks at payment history and pre-tax profit. Mostly at profit and loss accounts
Experian – gathers trade data and bank data. Looks only at payment history.
What are the three types of financial statement you may come across relating to a company?
Profit and loss
Cash Flow
Balance Sheet
What is an asset / liability?
Asset – used to produce value
Liability – legally responsible for something
What do you understand by the term Generally Accepted Accounting Principles (GAAP)?
Generally Accepted Accounting Principles are a set of standards for financial reporting.
Company accounts must be prepared in this way if they are shared outside of the company.
How do companies know which reporting framework to comply with?
All companies need to use UK-adopted international accounting standards (IAS) – depends on the nature of their operations, international bound etc.
Which reporting framework do public limited companies have to comply with?
All companies need to use UK-adopted international accounting standards (IAS)
How would you assess the financial strength of an entity, e.g. for a valuation?
You would look at their covenant strength. You would do this by looking at for example either Dun and Bradstreet or Creditsafe.
Consider Debt to equity ratio
Can you tell me about a common financial measure?
· Revenue – Profit and loss statement
What is the acid test?
· Acid test = indicator if a business has short-term assets to cover its short-term liabilities
What is the ROCE?
· ROCE = return on capital employed
What is the working capital ratio?
· Working capital ratio = total assets /current liabilities
What is the gearing ratio?
· Gearing ratio = compares company debt to equity (how a company is funded)
What is the net assets per share?
· Net assets per share = total assets – total liabilities / no. of equity shares
Can you tell me what the role of an auditor is?
An as an external person who undertakes review of business accounts to ensure everything is in line.
When are audited accounts needed and why?
Audited accounts are needed to ensure that companies are essentially doing what they are saying they are doing.
Tell me something you understand from the Companies Act 2006.
Companies Act 2006 is to modernise company law.
Nominee shareholders can elect to receive company information electronically if they wish.
Tell me what it means to prepare accounts in accordance with IFRS.
International Finance Reporting Standards state how particular types of transactions and other events should be reported in financial statements
What is the difference between UK GAAP and IFRS?
GAAP - rule based, required if accounts go outside of company, allow first in, first-out
IFRS - Principles based, do not allow last-in, first-out (typically lowers net come)
What is the basis of valuation under IFRS 13?
Fair Value measurement
What is fair value?
“The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date”
What has changed in relation to lease accounting / IFRS 16?
IFRS 16 is the lease accounting standard.
- The full cost of a lease must be accounted for on the balance sheet
- An occupier liability is paying rent
When did the change to IFRS 16 come into effect?
1st January 2019
What is FRS 102?
Financial reporting standards 102 – it sets out the financial reporting requirements for entities that are not applying adopted IFRS
What changes have been made to FRS 102?
Requires companies to revalue their tangible fixed assets
· Owner-occupied – existing use value
· Investment properties – market value
What are statutory accounts?
Statutory accounts are financial statements or year-end accounts
Why is good financial record keeping important to you?
Good financial record is important to me because it enables me to see what is coming in each month and for me to keep on top of what the team is billing.
Tell me three ways you ensure that clients’ money is handled properly.
I personally don’t deal with client’s money. However, if I did, I would:
1. Keep in separate account
2. Keep in clearly named account
3. Ensure that they have their monies on demand
What RICS guidance or Schemes do you adhere to in doing so?
RICS guidance Client Money Handling
RICS Client’s Money Protection Scheme:
- Surveying Services
- Residential services
Explain your understanding of the VAT domestic reverse charge for building and construction services.
Implemented in March 2021 for construction services
The buyer (contractor) accounts for the VAT rather than the supplier. Ensures that VAT is reported correctly by workers.
When do changes to the reverse charge apply from?
1st March 2021
Can you accept a cash payment fee from a client?
No it needs to processed under BACS so that it is protected
10,000 euros is the most
