Financial Management and the Planning Cycle Program Support Notes by: Belinda Taylor BBus, Grad Dip Ed (Sec) Produced by: VEA Pty Ltd Commissioning Editor: Sandra Frerichs B.Ed, M.Ed. Executive Producer: Simon Garner B.Ed, Dip Management You may download and print one copy of these support notes from our website for your reference. Further copying or printing must be reported to CAL as per the Copyright Act 1968. To order or inquire please contact VEA: VEA (Video Education America) 6902 Hawthorn Park Dr Indianapolis, IN 46220 Phone: 1.866.727.0840 Fax: 1.866.727.0839 E-mail orders@veavideo.com Website www.veavideo.com
For Teachers Introduction This program provides an informative glimpse into real life financial planning and management that takes place within large organizations today. An overview of the key roles and responsibilities of people in the finance department is provided, and the financial planning cycle is explained clearly, using supporting examples from KPMG staff who work in this area. Timeline 00:00:00 Introduction 00:00:32 The role of financial management 00:03:00 The objective of financial management 00:06:51 Planning cycle part 1 getting stared 00:09:15 Planning cycle part 2 on the move 00:11:27 Planning cycle part 3 keeping check 00:14:59 Credits 00:15:29 End program Related Titles Management Styles Explained The PR Function Small Business Management Series Starting Up Effective Communication in Business Environmental Sustainability in Business A Case Study Recommended Resources http://www.asx.com.au/ Australian Stock Exchange website. This is good to look at the annual reports and websites of publicly listed companies, all of which should have CFO s and be large organizations. http://www.business.vic.gov.au/busvic/homepage/pc=home Starting and Managing a small business. Whilst it s a small business website, it s good on the importance of managing finance in easy to understand language. http://www.cpaaustralia.com.au/cps/rde/xchg Certified Practicing Accountants 2
Student Worksheet Initiate Prior Learning 1. Define the following terms: a) Budget b) Business Plan c) Liquidity d) Cash Flow e) Working Capital 3
f) Financial controls 2. Research Task: The people behind financial planning and management Using accounting based websites such as http://www.cpaaustralia.com.au Certified Practicing Accountants or employment based websites such as www.seek.com.au complete the following table: Position What does their role involve? Salary? Chief Financial Officer (CFO) Management Accountant Tax Accountant Financial controller Internal auditor Finance/business analyst 3. In your opinion, what is involved in good financial planning? How does good financial planning contribute to business success? 4
Active Viewing Guide 1. Financial management is multi faceted. It involves: P F A and E Legal, regulatory issues 2. Who is responsible for the overall financial management of a business? 3. What duties do accountants and analysts focus on? 4. What does good financial management look like? Identify five key objectives. 5. Why does a business need excellent financial management as far as cash flows? 5
6. Plans for financial growth should be reasonable and s. 7. What is liquidity? 8. What is Return on Capital? 9. What must happen before a business can plan for the financial management cycle? 10. Once the financial position and business plan has been finalized and developed then a can be prepared. 11. According to Ben Skarrasbrek from KPMG, it can be a problem if you pay your accounts payable too? 12. Who uses the financial reports? 13. What role does IT play in keeping accurate records? 14. Provide an example of a financial control. 6
15. How can risks and losses be minimized? 16. At the beginning of the planning cycle, a business needs to: Understand the financial position Deliver the b p Create the 17. Fill in the missing words: During the planning cycle, it is important for a business to on financial performance and financial performance. 18. The Planning Cycle is all about preserving the of the business. 7
Extension Activities 1. Working individually or in pairs, rank the following from 1-10, in the order they should occur for successful financial planning: Interpret financial performance Deliver the business plan Identify risk and loss Report on financial performance Understand current financial position Create the budget Accurate record keeping Utilize Cash Flow Change focuses and greater efficiency Strong financial controls 2. Identifying finance problems in the business Divide into small teams and work to solve the problem that has been identified as an area of concern regarding financial planning. Information: You have been selected to be a consultant on financial planning. You have found the following problems and assembled the staff to a meeting to provide possible solutions to these problems. For each of the problems, state why it is a problem and explain how it could be solved: Accounts Receivable is paying on average 65 days with Accounts Payable at an average of 15 days. The Budget has been prepared for the next 2 months only. One signature is required on checks. It can be anyone in the finance department. Computer back ups are made once a month. The working capital ratio is currently 12:1. 8
3. Article Analysis a) Search for an article on financial management. Sources can be government based websites designed to help get business owners started or provide advice, mainstream newspapers / media or journals. b) Summarize the content of the article providing either 100 words or 5 key points. c) Write / create your own article on successful financial management. It should incorporate the material provided in the program, as well as information found in the extension activities after the program. 9
Suggested Student Responses Active Viewing Guide 1. Financial management is multi faceted. It involves: Planning Forecasting Analysis and Evaluation Legal, regulatory issues 2. Who is responsible for the overall financial management of a business? CFO Chief Finance Officer 3. What duties do accountants and analysts focus on? Day to day operations: Accounts receivable and payable, payroll, tax and regulatory compliance, risk management, shareholder and investor information, accurate record keeping 4. What does good financial management look like? Identify five key objectives. Meeting objectives of profitability Growth Efficiency Liquidity Return on capital 5. Why does a business need excellent financial management as far as cash flows? To be able to pay suppliers and your liabilities and debts. 6. Plans for financial growth should be reasonable and sustainability 7. What is liquidity? How quickly or effectively cash is moving to and from the business 8. What is Return on Capital? How much profit the business makes from the money its investors have put in 9. What must happen before a business can plan for the financial management cycle? A company must understand its immediate financial position. 10. Once the financial position and business plan has been finalized and developed then a budget can be prepared. 11. According to Ben Skarrasbrek from KPMG, it can be a problem if you pay your accounts payable too? Early 10
12. Who uses the financial reports? Finance controller The board Auditors External stakeholders 13. What role does IT play in keeping accurate records? Backs up spreadsheets, records 14. Provide an example of a financial control. No check is written out without the signature of the financial controller. 15. How can risks and losses be minimized? Put risk management policy in place 16. At the beginning of the planning cycle, a business needs to: Understand the current financial position Deliver the business plan Create the budget 17. Fill in the missing words: During the planning cycle, it is important for a business to report on financial performance and interpret financial performance. 18. The Planning Cycle is all about preserving the future of the business. 11