Strategy of a Finance Manager Flashcards by John Walsh

Five key objectives of a FD

Meets its strategic goals, Maintains its financial health, Identify future financial problems, Identify financial opportunities, Scalable and Integrated Systems and Processes.

How well did you know this?

Not at all

Perfectly

First 100 days for finance department?

[X] Work with what you have to begin and then create what could or should be.

[A] (1) Self (2) Finance team (3) Organisation (4) Marketplace.
[B] (1) Clarity of Roles, Goals, Processes and Rewards.
[C] (1) Understand the Business.(2) Understand the People. (3) Evaluate Processes and Controls. (4) Understand unique commercial requirements of the business.
[D] (1) Take inventory of what you are good at extend out from your skills. (2) Determine what your organisation (REALLY) need and work backwards, even if that means learning new skills.
[E] More cohesion is required rather than more hierarchy. (2) What is required is a network of leaders. (3) Leaders do not need positional power to influence others.

Long-term to finish - Move the department through the stages - (1) Perception. (2) Metrics. (3) Info orientation. (4) Processes.

How well did you know this?

Not at all

Perfectly

Key functions at core?

Budgeting, Performance, Reporting, Cash Flow, Forecasting plus SA, Working capital, Publication of accounts, Project appraisal, Statement analysis.

How well did you know this?

Not at all

Perfectly

4 key points in approaching job / Department?

(1) Translate board objectives into financial plans. (2) Useful resource rather than police force. (3) Business intelligence. (4) Controls-conscious environment.

How well did you know this?

Not at all

Perfectly

Elements of reporting pack?

P & Loss, Balance sheet, Sales/Price/Margin, Cost/variance - Ac payable and cash out, Ac Receivable and cash in, Cash flow forecast, Forecast + sensitivity analysis, Budgeting - For Ex, Cap Ex, Project appraisal, Statement analysis - KPI’s, Contracts review. Controls review, Other review.

How well did you know this?

Not at all

Perfectly

Circle on matrix?

Forward-thinking financial leadership. Active participation in strategic decision making.

(1) Good corporate governance (2) Risk register (Strategic and Operational (3) ICT and Information governance (4) Commercial minded. (5) Regulatory and governmental compliance + Company Administration (6) Business Intelligence (Fin and non-fin info..) + Businesses are partnerships + Internal / External interface (7) Internal / External audit + Process and policy adherence + Control-conscious environment.

How well did you know this?

Not at all

Perfectly

Green (2) on matrix (+7)?

**(1) Strategic objectives and Operational management.
(2) Plan, Record and Control an organisation’s activities.

(1) Identify objectives
(2) Identify potential strategies
(3) Evaluate strategies
(4) Choose alternative courses of action
(5) Implement the long-term plan
(6) Measure actual results and compare with plan
(7) Respond to divergences from plan

How well did you know this?

Not at all

Perfectly

Optimum approach to strategies?

(1) You cannot implement what you do not know. (2) A flexible approach that adapts to the unexpected (3) Difference between operational and strategic thinking and people (4) Keep strategy on track, keep it adaptable and if it fails move from it sooner rather than later and develop another.

How well did you know this?

Not at all

Perfectly

4 headings in prism of finance department??

(1) Perception. (2) Metrics. (3) Info orientation. (4) Processes.

How well did you know this?

Not at all

Perfectly

Daily reporting?

Drive the business towards its targets, Flight instrument panel. Position and performance, Remedial - Narrative

How well did you know this?

Not at all

Perfectly

Monthly reporting - Focus 1?

Focus in upon (-), Drive forward (+) - Accurate reliable information, financial and non financial… - Too little vs Too much information - Timely information vs Accurate information - A continually forward-facing organisation is hugely beneficial to (1) The performance of the business and (2) Relationships within the business.

How well did you know this?

Not at all

Perfectly

Monthly reporting - Focus 2?

Working papers are principle link between accounting records and financial statements. - Record, Evidence, Reconcile, Adjust, Working papers - Well ordered documentary regime tracing and explaining any balance - Papers and Timetables, Conventions and Priorities.

How well did you know this?

Not at all

Perfectly

Annual reporting?

Processes, Objectives, Management Accounts to Statutory Accounts, Disclosure and Audit.

How well did you know this?

Not at all

Perfectly

Policies and Procedures - Areas of

Account Reconciliation
Revenue Recognition
Expense Prepayment and Accrual Reconciliation
Payroll administration and reconciliation.
Income Tax - Preparation and Reporting
Journal entries - Routine, Non-routine and Estimates
Property, Plant and Equipment
Goodwill and Other Intangible Assets
Accounts Payable - Requests from parties for payment
Accounts Receivable - Credit, Collection and d’ful debts
Bank Reconciliation
Cash and Banking
Petty Cash and Source and Use of FX
Inventory - Count, Management and Valuation.
Intercompany transactions and reconciliation.
Authorisation
Communication
KPI’s

How well did you know this?

Not at all

Perfectly

Element of analysing processes?

Cost, Creep, Identify, Flowchart, Buy-in, Challenge, Tools / Metrics / Controls (TMC), Make sure it works, Drive forward.

How well did you know this?

Not at all

Perfectly

The effective management of a process or a series of processes entails a cycle?

Define, Action, Measure, Analyse, - Improve & Control or Report & Instruct.

How well did you know this?

Not at all

Perfectly

What is internal control?

Processes, designed and effected by those charged with governance, where rules/procedures and mechanisms are introduced and implemented within a business to ensure integrity, accountability, compliance, fraud and effectiveness and efficiency of operations.

How well did you know this?

Not at all

Perfectly

What are the prevent controls and detect controls?

Authorisation, Documentation, Reconciliation, Security and Segregation of duties. Prevent 4/5 Detect Reconciliation and Internal and External audit.

How well did you know this?

Not at all

Perfectly

7 steps in the Planning and Control Cycle.

(1) Identify objectives [PLANNING]
(2) Identify potential strategies [PLANNING]
(3) Evaluate strategies [PLANNING]
(4) Choose alternative strategies if required. [PLANNING]

(5) Implement the long-term plan
(6) Measure actual results and compare with plan [CONTROL]
(7) Respond to divergences from plan [CONTROL]

How well did you know this?

Not at all

Perfectly

The objectives of a budgetary planning and control system

(1) To ensure the achievement of the organisation’s objectives.
(2) To compel planning.
(3) To communicate ideas and plans.
(4) To coordinate activities.
(5) To motivate employees to improve their performance.
(6) To provide a framework for responsible accounting
(7) To establish a system of control

How well did you know this?

Not at all

Perfectly

Risk management is greater than Liabilities and Investments?

Strategy, Financial, Legal, Security.

How well did you know this?

Not at all

Perfectly

5 stages of dealing with risk?

Identify risk, Analyse risk, Prioritise risk, Deal with risk [Avoid, Accept, Mitigate or Transfer], Monitor risk.

How well did you know this?

Not at all

Perfectly

Risk the 2 - part matrix

The Table of Risk
High risk of occurring / Low cost
High risk of occurring / High cost [Detailed plans]
Low risk of occurring / Low cost
Low risk of occurring / High cost [Outline plans]

How well did you know this?

Not at all

Perfectly

4 main types of data analysis?

Descriptive, Diagnostic, Predictive, Prescriptive.

How well did you know this?

Not at all

Perfectly

Cash flow statements / Forecasting tools?

Time series model, Econometric model (Relationship between economic variables to forecast future developments), Judgemental/Opinion/Subjective, Delphi method. - Straight line, Moving average, Single linear regression, Multiple linear regression.

Optimising profit?

(1) The real revenue of your business is net margin after all your variable costs. (2) More bad business decisions are made by including fixed costs in an appraisal of product performance than through any other accounting convention. (3) Do not convert a variable cost into a fixed one (make it yourself) unless the fixed cost will still be economical if a 30% fall occurs in the level of demand. (4) Breakeven to actual sales calculation.

Optimising performance?

You must understand the structure and dynamics of the business, You must understand the driving forces inside and outside the business, You must understand people’s personal objectives which are all different, Management reports must extend beyond results to causes and effects.
(1) Financial Performance
(2) Competitive Performance
(3) Quality of Service
(4) Flexibility
(5) Use of Resources
(6) Innovation

Optimising cash?

(1) Generation of profits (2) Well-organised treasury (3) Minimum working capital (4) Effective use of fixed assets.

How do you deal with stress?

Analyse and understand, prioritise and do, and deal with as part of a team. Breathing, Exercise, laughter.

SCAMPER

SCAMPER - Substitute, Combine, Adapt, Modify, Put to other use, Eliminate, Reverse.

Preferable to present solutions rather than questions or asks for views.

Make good, clear, firm recommendations and people will see you as a confident, professional problem solver who knows how to get things done. These are the attributes you need to be known for.
GOOD / CLEAR / FIRM CONFIDENT / PROFESSIONAL / PROBLEM SOLVER / WHO KNOWS HOW TO GET THINGS DONE

All reports should be short and useful.

Concentrate not on what is running to plan in first instance but what is not. You do not need to be bogged down in data which tells you nothing.

Connect the dots.

Connect the dots between individual roles and the goals of the organisation. When people see that connection, they get a lot of energy out of their work. They feel the importance and meaning in their job.
SELF / FINANCE / ORGANISATION / MARKETPLACE

True motivation comes from 4 things.

(1) Achievement (2) Recognition. (3) Job satisfaction (4) Personal development

Budget observation

Fixed budgets do not work today. A budget is too static an instrument and locks managers into the past - into something they thought was right last year. To be effective in a global economy with rapidly shifting market conditions and quick and nimble competitors, organisations must be able to adapt constantly their priorities and put their resources where they can create the most value for customers and shareholders. In order to do that, the concept of the Beyond Budgeting Management Model comes into play.

Traditional Budgeting Process versus Beyond Budgeting Processes.
[1] GOALS - Short-term focus versus Long-term focus.
[2] CONTROLS - Financial indicators (past focus) versus Past and Future indicators.
[3] REWARDS - Individual teams (Non-sharing) versus Reward as a whole.
[4] PLANS - Predict and Control versus Continuously Updated
[5] RESOURCES - Centralised allocation versus Available on demand to fast react to opportunities.

RAPIDLY SHIFTING MARKET CONDITIONS / NIMBLE COMPETITORS / RESOURCES WHERE THEY CAN CREATE THE MOST VALUE.

Balanced Scorecard (Beyond Budgeting Management Model)

The introduction of new management instruments such as the Balanced Scorecard, which help to better align the entire organisation with corporate strategic objectives and to focus it on the essentials, has created the right foundation. Because if corporate objectives and the strategies are clear for all people in an organisation, one can, in principle react to changing market conditions. But then the fixed budget comes in the way and prevents organisations from really doing the right things. What is often missing is a more flexible operational planning and control model. The Beyond Budgeting Management Model looks to fill that gap.

CORPORATE OBJECTIVES AND STRATEGIES ARE CLEAR TO ALL

Financial Performance

Financial performance measures can be divided into 4 main groups.
Profitability, Liquidity, Gearing and Growth.

Financial Performance measures include Revenue, Costs, Profit, Cash Flow and Share Price. (5)

Non-Financial Performance includes the fulfilment of responsibilities towards customers and suppliers and the welfare of employees and society in general. [4-way]

NFPI’s are useful in the modern business environment.

Related Party Transactions and Disclosures

In the absence of information to the contrary, it is assumed that a reporting entity has independent discretionary power over its resources and transactions and pursues its activities independently of the interests of its individual owners, managers and others. These assumptions may not be justified when related party transactions exist because the requisite conditions for competitive, free market dealings may not be present. While the parties may endeavour to achieve arm’s length bargaining, the very nature of the relationship may preclude this occurring.

IAS 7 - Types of Operating Activities (Statements of Cash Flows)

(1) Cash receipts from Sale of Goods and Rendering of Services. (2) Cash receipts from Other Revenues, and Royalties, Fees, Commissions (RFC). (3) Cash payments to suppliers. (4) Cash payments to and on behalf of employees.

IAS 7 - Types of Investing Activities (Statements of Cash Flows)

(1) Cash Payments and Receipts to acquire Tangible and Intangible Assets.
(2) Cash Payments and Receipts relating to Interests in other Entities.
(3) Cash Payments and Receipts relation to Advances and Loans to other parties.

IAS 7 - Types of Financing Activities (Statements of Cash Flows)

(1) Cash proceeds from issuing shares.
(2) Cash payments to acquire or redeem shares.
(3) Cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other short or long-term borrowings.
(4) Cash repayments of amounts borrowed.

The Budgetary Process.

(1) The Principle Budget Factor - The Principle Budget Factor is the resource or activity which is limited and which forms the base for the preparation of the budgets. For example, sales volume, raw material, labour hours or machine hours. It should be identified at the beginning of the budget process, and the budget for this is prepared before all the others.
(2) Master Budget and Functional Budgets.
(3) Budget Manual.
(4) Budget Committee.

Capital Expenditure / Revenue Expenditure / Recurring & Major Projects

Capital Expenditure - (1) is the acquisition of non-current assets or (2) an improvement in their earning capacity.
Revenue Expenditure - (1) is expenditure that is incurred for the purpose of the trade of the business or (2) to maintain the existing earning capacity of non-current assets.
Recurring and Minor non-current asset purchases may be covered by an annual allowance provided for in the capital expenditure budget.
Major projects will need to be considered individually and will need to be fully appraised.

What should be taken into account when deciding whether to investigate reported variances.

(1) Materiality (2) Controllability (3) The interdependence of variances (4) The cost of an investigation.

Causes of variances

If the cause of a variance is controllable, action can be taken to bring the system back under control in future. If the variance is uncontrollable, but not simply due to chance, it will be necessary to revise the budget and review forecasts of expected results.

Value Analysis

Value Analysis is a planned, scientific approach to cost reduction.

Value Analysis considers 4 aspects of value
(1) Cost Value
(2) Use Value
(3) Exchange Value
(4) Esteem Value

Reconciliation Status

Circle 1 of 3
(1) Balanced with no outstanding explanations
(2) Balanced with known adjustments to be taken
(3) Not balanced with investigative action to be taken

IAS 8 - Accounting POLICIES, changes in accounting ESTIMATES, and ERRORS

Accounting policies - Rules that companies decide for themselves. Different companies, Different policies, all within the framework. (ex. Straight line or Reducing balance).
Accounting estimates - Estimates undertaken in course of account preparation. (ex. What will be the residual value of asset after 5 years? What will be the number of years?
Errors = Errors.

4 pillars of accounting statements

(1) Recognition and Derecognition.
(Asset, Liability, Revenue, Expense, Equity?)
Ex. Advance payment? Revenue - No, Liability - Yes.
(2) Measurement.
How much is the amount that needs to be entered in the accounts?
Historical Cost, Replacement Cost, Book value, Fair Value, Net Realisable Value?
(3) Presentation.
Where should it be shown? Within which statement and where within the statement?
(4) Disclosure.
What additional information should we provide?
There may be one line but there is almost always a lot of information contained within. Ex. Cost of sales, Discontinued operations. Ex. 100 pages of accounts. After P&L, Balance Sheet, Cash Flow & Equity, 96 pages of notes.

Traditional Budgeting Process versus Beyond Budgeting Processes.

[1] GOALS - Short-term focus versus Long-term focus.
[2] CONTROLS - Financial indicators (past focus) versus Past and Future indicators.
[3] REWARDS - Individual teams (Non-sharing) versus Reward as a whole.
[4] PLANS - Predict and Control versus Continuously Updated
[5] RESOURCES - Centralised allocation versus Available on demand to fast react to opportunities.

Three types of Budget and Three approaches to Budget.

Fixed Budget, Flexible Budget & Rolling Budget.
Incremental (Protect/Inefficiency/Slack), Zero-based (Built from scratch/eliminates inefficiency/Slack) &
Value-based (What is its value to business as basis of inclusion/non-inclusion.)

A Not-For-Profit Organisation.

A Not-For-Profit Organisation is an organisation whose attainment of its prime goals is not assessed by economic measures. However, in pursuit of its goals it may undertake profit-making activities.
A Not-For-Profit Organisation has limited control over both (1) the level of funding it receives and (2) The objectives it can achieve.

Do fixed budgets work today?

“Fixed budgets do not work today. A budget is too static an instrument and locks managers into the past - into something they thought was right last year. To be effective in a global economy with rapidly shifting market conditions and quick and nimble competitors, organisations must be able to adapt constantly their priorities and put their resources where they can create the most value for customers and shareholders. In order to do that, the concept of the Beyond Budgeting Management Model comes into play.”

Balanced Scorecard has created the right foundation on which to build the Beyond Budgeting Management Model.

What is a Balanced Scorecard?

The Balanced Scorecard is a management system aimed at helping to better align the corporate strategic objectives with the entire organisation and to focus it on the essentials, improving performance.
FINANCE, CLIENTS, INTERNAL PROCESSES, - EDUCATION & IMPROVEMENT, INNOVATION & GROWTH.

McKinsey 7S Model

The McKinsey 7s Model provides a way of looking at an organisation as a set of interconnected and independent subsystems. This interdependence highlights the strategies adopted in any one area of an organisation (or changes to any of the strategies) will have an impact on other parts of the organisation.
STRATEGY, STRUCTURE, SYSTEMS, ‘Hard’ STAFF, SKILLS, STYLE, ‘Soft’ SHARED VALUES ‘Centre’

The Value Chain

The Value Chain provides a framework for understanding the location and nature of the skills and competencies in an organisation that provide the basis for its competitive advantage.
The Value Chain can help an organisation to secure competitive advantage in a number of ways :
(a) Invent new or better ways to do activities
(b) Combine activities in new and better ways
(c) Manage the linkages in its own value chain
(d) Manage the linkages in the value system
[The grower has added value, and the growers success in growing produce of good quality is as important to the customer’s ultimate satisfaction as the skills of the chef.]

Intranets -
Extranets -

Database Management Systems -

Enterprise Resource Planning Systems - ERPS -

Developments in IT have revolutionised the potential for management accounting data, increasing the volume and variety of possible reports.

Management Information System -

Intranets - Internal network to share information, surrounded by firewall.
Extranets - Intranet that is accessible to authorised outsiders.

Database Management Systems - Is a complex software system that organises the storage of data in the database in the most appropriate way.

**Enterprise Resource Planning Systems - ERPS - Are software systems designed to support and automate the business processes. Integrated software packages that control all personnel, material, monetary and information flows in a company. **

Developments in IT have revolutionised the potential for management accounting data, increasing the volume and variety of possible reports.

Management Information System - Is a system to convert data from internal and external sources into information and to communicate that information, in an appropriate form, to managers at all levels, in all functions, to enable them to make timely and effective decisions for planning, directing and controlling the activities for which they are responsible.

Information Overload. Output Reports.

Developments in IT systems mean that, in many organisations, there is potentially a vast range of different reports and statistics which managers can refer to.
With this increase in information comes the risk of information overload. The difficulty managers can have in understanding an issue or making a decision due to the presence of too much information.

**A number of developments in output reporting from information systems have been driven by the need to provide timely and tailored information, but also to avoid swamping the user with too much information. **

Dashboards + Drill Down Reports.
Exception Reporting

Exception Reports are reports that are only triggered when a situation is unusual or requires management action. These avoid information overload.

Measurement of assets.

1/ Historical Cost.
2/ Current Cost (Replacement cost - Asset value has gone up in 2 years yet original depreciation remains the same.)
3/ NRV (What it can be sold for less associated expenses.)
4/ PV (Value in use, Discounted future cash flows.

Brainscape's Knowledge GenomeTM

Strategy of a Finance Manager Flashcards

Brainscape's Knowledge Genome^TM