Role of Chartered Accountants in. Presentation by: Ahmad Saleem Performance Management Consultant

Transcription

1 Role of Chartered Accountants in Building Successful Organizations Presentation by: Ahmad Saleem Performance Management Consultant

2 Objective of this Seminar To discuss role of Chartered Accountants in extended form My own Experience as Employee & as Consultant Feel that in many Organization Chartered Accountants can perform significantly better what they are presently performing Presently they are doing their JOB in perfect way but additional working can bring major change Basic Objective of this seminar is to share and discuss our experiences and knowledge in this regard

3 Roles of Chartered Accountants Head of Accounts & Finance Any position in Accounts Department Internal Auditor External Auditor Management Consultant Any other position

4 Why in this Position Observing all Activities Every Activity has Financial Impact Every Activity is Measureable Cannot improve Quality During Audit Learned all the Areas

5 Special Traits of Chartered Accountant Chartered Accountants have special traits, which are developed due to their special nature of training System based Monitoring Risk Analytical Completeness Compliance Testing Substantive Checking Planning Consideration of Financial Value Monitoring Auditing Nature

6 Traits for Building Successful Organization Visionary Take Ownership Traits Take Responsibility Complete Business Picture Leadership Success

7 Main Areas Planning Budgeting Systems Costing Risks & Controls Performance Monitoring Monitoring

8 What to Avoid Policing Petty Matters Audit of every thing Munshi

9 What to Opt Understanding of the Business Team work Cooperation Leadership

10 Objectives of the Organizations Objectives based on basic thought Different Objectives for different Org. Based on available resources and opportunities Working towards achieving their Objectives

11 Success What is Success? Sustainability Financial Stability Achieving Your Objectives What are Objectives? Expansion Smooth Operations No Surprises Controlled Working

12 Are Chartered Accountants Responsible? What s your opinion? Need Discussion In my opinion

13 Then Why Someone will do this? Success Comes by taking Responsibility Ownership In most of the cases, the Chartered Accountants are not directly responsible But they are in position to guide the others for making Organization successful They are in best position to advise Management regarding different options.

14 Main Areas Organizational Level Departmental Level Activity/Transactional Level

15 Organizational Level

16 Organizational Level Planning Goals and Targets Benchmarking Financial Planning Fixed Assets Management Costing Budgeting Organizational Behavior Systems and Procedures Risks & Controls Knowledge Management Role of MIS

17 Planning Strategic Planning Planning Business Plan

18 Planning Strategic Planning Business Plan Long Term Based on Resources Cannot be changed EASILY Short Term planning based on this By Top Management For Short Period Based on Resources Can make Changes easily Operations based on this By Senior and Middle Management

19 Goals and Targets Based on the Business Plan, Goals and targets will be determined Monitoring of Goals and Targets Verification of Actual Achievements Linking and reconciliations of Results Keeping on track all the departments Sales, Production, Purchases, Utilization of Resources

20 Financial Planning Keeping complete control on the finances of the Organization Keep financial burden minimum Establish accurate financial requirement Look for high stocks and receivables Avail maximum benefit from Suppliers and Creditors Never go for Capital Investment from Working Capital Facilities Accurate projected Fund Flow Statement involving all departments and making them responsible

21 Fixed Assets In most of the cases, Fixed Assets is the major part of the investment, watch it.. Complete record of Fixed Assets Differentiate between Productive and Supportive Assets Calculate return on Assets with Sales and Contribution Margin Record of Insurance and Warranties Repair & Maintenance Preventive Maintenance Disposal of Assets Assets Condition

22 Costing, Contribution Margin and Breakeven Cost incurred when a resource is utilized. Keep complete record of Cost, Contribution Margin and Breakeven Analysis Complete record of cost including direct and indirect cost, fixed cost etc. Computation of Contribution Margin, linking with Sales and Profit Product wise Contribution Margin Compare return with relation to investment, time consumption etc. Breakeven analysis, simple and based on cash return

23 Budgeting Budgeting is a process of making best estimate regarding a future activity and then following the initial estimate. Budgeting should be for every activity Involve all the departments and introduce the culture of Budgeting People are reluctant in making budgets. Why? Periodic Comparison of Actual data and Budgeted data Check for reasons for variations

24 Budgeting Budgeting is a process of making best estimate regarding a future activity and then following the initial estimate. Production Budgets Time Budgets Breakdown Budgets Wastage Budgets Energy Budgets Financial Budgets

25 Organizational Behavior Organizational Behavior is the personality of the Organization Cannot do much however following is possibility Delegation Responsibility Management Authority Ownership Result Oriented instead of.. System based Training and Guidance

26 Systems, Policies and Procedures Performing any activity in a similar way all the time and all users have same understanding is called system. This also include processes, policies & procedure. Ensure system for every activity Policies should be available for all scenarios Standard Operating Procedures SOPs Should be demanded

27 Systems, Policies and Procedures System for Material Issuance Discount to Customers Advance against Salary Traveling policy Material receiving

28 Risks and Controls With every activity there are risks Inherent, intentional, un-intentional etc. For Prevention of risks, there are certain Controls Authorization Documentation Reporting Budgets Physical Checking Access Controls

29 Risks and Controls Production Risks Planning Risks Marketing Risks Sales Risks Human Resource Risks Fixed Assets Risks Stocks Risks Expenses Risks Purchasing Risks Quality Risks

30 Knowledge Management Organizations need to have full information and knowledge regarding all related activities. Data Documents and Forms Reports Information Knowledge

31 Knowledge Management - Discussion Production Marketing Sales Fixed Assets Operations Purchasing

32 Role of Software Software can play vital role in Organizational Success this may include every possibility of Automation What can be controlled? Basic system is a MUST requirement Objectives and Benefits Implementation

33 Role of Software Usage Benefits Processing through Software Magnetic Cards, Bar Codes etc. Sensors, timers etc. Programmable Logic Controllers Accuracy Consistency Speed Control

34 Departmental Level

35 Departments Marketing Quality Sales Administration Production Human Resource Planning Internal Audit Purchasing MIS Stores Accounts

36 What to observe? Departmental Working Departmental Costing Activity based Costing Effectiveness Objectives Results How Effective Wastage of Resources Information & Knowledge Cost benefit Analysis As Profit Center In most of the cases, Chartered Accountants feel that these areas are out of their Jurisdiction we need Discussion

37 Marketing Marketing is a process where product awareness is built and established Link Marketing with Sales Check Relevance Check with actual activities Marketing Plan with expected results

38 Sales Sales is selling the goods/product and dealing with all related activities. Contribution Margin Most Important Actual and Target Sales Comparison Related expenses relevance Sales Return and their reasons Receivable, recoveries and aging

39 Production / Operations Know the production process Production Capacity Production is a process of manufacturing and preparing goods for Sales and Operations are the activities where production process is not involved. Establish Benchmark Convert in financial term Wastage and efficiency Production Accounts Compare actual with budgeted with reasons

40 Production Planning Relates with all planning matters of Production and Operations Planned as per Capacity Optimum utilization Adjustment of different orders Coordination with Sales and Production Losses due to lack of planning Non utilization of capacity and reasons

41 Purchasing Purchasing the required stocks, material, parts and other items On time purchasing Compare pricing with target prices Quality how to measure Payment terms Warranties and after sales services

42 Material Management All matters relating to management of materials Control on receipt Gate Control Stacking Old Items reasoning Issuance / Consumption Damage / Expiry Dates Physical Checking and Record Keeping

43 Quality Control Checking quality of goods produced with desired Quality Level Why Chartered Accountant is responsible? Incurring a cost and results should be there Claims due to Quality charged to deptt Department should certify Mention and note all the known problems

44 Administration Administration provides support services relating to communication, transportation, utilities, entertainment, traveling and general office supplies and arrangement. Not supposed to sign without verification Establish justification Mess charges, conveyance, overtime, utilities

45 Human Resource All matters relating to Human resource establishing requirement, JDs, hiring, retention etc.. Department budget for HR Requirement based on some criteria Policies must be clear and available Record must be complete Roles of departments known to everyone

46 Internal Audit In house checking of transactions and activities Should be responsible for whole Organization Normally considered to check only financial Production and technical matters Identify risks and establish controls What expected improvement?

47 MIS / IT Related with all hardware and software matters and activities In best position to coordinate with IT Establish requirements and assist in implementation Verify results Suggest system improvements Decision Support System

48 MIS / IT Related with all hardware and software matters and activities In best position to coordinate with IT Establish requirements and assist in implementation Verify results Suggest system improvements Decision Support System

49 Accounts Responsible for complete book keeping Responsible to keep accounting record of all transaction of the Organization related activities. Includes normally Finance, Costing, Taxation, Budgeting and Corporate requirements Required to check in depth all transactions Can question any transaction Use Reconciliation and ratios Check unusual activities Need to extract Information and Knowledge

50 Activity / Transactional Level

51 Transactional Level Justification Authorization Relevance Budgeted Purpose Information & Knowledge Reasonableness Support Record Documentation Physical Systems and Rules

52 Analysis Reports and Analysis Ratios Reconciliation

53 Case Studies Marketing Marketing department spent Rs. 10 million on advertising campaign, in which heavy advertisement was made. What questions and parameters can be checked by the Chartered Accountant? Large Sale contracts have been signed by the Sales Department and Top Management is very excited about these Sales? What sort of concerns can be raised by a Chartered Accountant in these contracts? Sizing Beams, which are used in Weaving Industry need to be polished after certain period of time? You have received bill of Rs 400,000 for their polishing? What sort of questions can be raised and asked?

54 Case Studies Quality Control Your Company is dealing with the customers who are not quality conscious, however your management is too caring for quality matters. You will have to discuss this matter with Top Management, what should be the concerns which should be discussed. Company received an excellent low priced deal on main raw material. The Supplier is asking for Cash Payment, despite the main raw material there is uncertainty that material may not be used in near future. What should be your role in this case? Manufacturing department is showing excellent result, however they themselves prepare all the results and no one is checking their results, however management is very impressed with the high efficiency of Production. What sort of concerns can be checked by you?