Explain how the finance function works cross-functionally to achieve strategic objectives. Flashcards
What does VUCA stand for?
Volatile, Uncertain, Complex, Ambiguous.
Describe the current disruptive changes in business
Globalisation and geopolitics,
Rapid advancement in technology,
Risk and regulation
High profile scandals such as Enron and WorldCom in 2002 led shareholders to demand better protection and risk management.
Consumer empowerment
Consumers are becoming highly empowered.
Demographics and workforce changes
Broader stakeholder considerations
Beyond considering shareholders, there is an increasing need to develop a deeper understanding of, and respect for, the requirements of a broader range of stakeholders, including employees, suppliers, customers, local people, and government bodies.
What is involved in Financial accounting and operations?
Transaction processing, record-keeping, process improvements
Transaction processing and record keeping functions are foundational to any finance function.
What does Finance Information systems involve?
Data access, data integrity, dashboards
Although with increasing digitalisation of business, technology is imbedded across the organisation rather than being centrally located in an ‘information systems’ department, the IS function is still responsible for data access, privacy, and other important elements.
What does External reporting involve?
Financial statements, statutory and tax filings, internal controls
Preparing financial statements in accordance with GAAP or IFRS, filing of statutory reports and tax returns, and maintenance of internal controls over these critical functions are core components of the finance function.
The four v’s are the first stage of identifying what an organisations operational processes are. Name them.
Volume, variety, variation, visibility.
Describe VOLUME in operations management.
The volume of inputs and outputs can greatly affect the resources a business uses in its operations. High volume outputs often require a greater capital investment in machinery and equipment, to deliver the volumes required to meet demand. It can also require specialism in labour skills where employees are separated by skillset to perform specific roles in the production process to maximise the efficiency of mass production.
Describe VARIETY in operations management.
Some organisations have a wide variety of inputs into the production of a product or delivery of a service. Others have a wide range of outputs offered to customers. Some entities may only offer limited options to its customers. All of these factors influence how operations are managed and the resources needed for efficient operations. For example, a business that requires many components in its manufacturing process needs to ensure that it has a reliable supply chain that can deliver promptly so as not to hold up the production process.
Describe VARIATION in operations management.
Variation of demand can influence operations management. Some industries experience seasonality with peak periods during which greater demand for products arises. Resource planning and preparation is vital to ensure efficient operations during these peak periods.
Describe VISIBILITY in operations management.
Organisations that are highly visible to customers must ensure that their employees have strong communication and interpersonal skills to meet the needs of customers. An allocation of resources to customer service is vital in this type of industry. However, a business that has limited contact with its customers need not invest in this area.
Key external relationships of the finance function
Customers, Suppliers, External audit and tax providers, , professional consultants, banks and other lenders, Government regulatory bodies.
Describe the processes of Information to impact
Assemble the information,
Analyse for Insight
Advise to influence
Appy for Impact
Acumen for future
Define management accounting?
‘the sourcing, analysis, communication and use of decision-relevant financial and nonfinancial information to generate and preserve value for organisations’
What is VALUE to a business?
Value can be financial or non-financial and must be differentiated from price, cost, profit or cash flow. These are related concepts, but they are not the same as value. For example, we value air, but we do not pay for it. Nevertheless, they are important because they act as measures or stores of value.
Value is not limited to the past; it also extends to the present and the future. Past value is often used in reporting, present value in operational management, and future value in investment appraisal.
Value covers both the short term and long term. The short term is important because firms must survive for them to have any long-term prospects. However, short-term value must not undermine long-term value.1
Value and its drivers can be both tangible and intangible.
Short-term versus long-term value
Short term value relates to immediate profits and shareholder goals. Long term value may not immediately deliver of the shareholder needs but can create a valuable asset for the company in the future.
