finance skills for purchasing and procurement officers
DESCRIPTION
Finance For Non Finance Managers, Business Finance For Buyers- by www.businessservicessupport.com This course teaches procurement officers finance skills to enable them to evaluate the financial fitness of their suppliers. Visit our website to find out more about our traiing courses on Finance For Non Finance Managers For PurchasersTRANSCRIPT
DELIVERED BY:BSS Management ConsultancyVisit www.businessservicessupport.com Tel: 0845 226 4315
BUSINESS FINANCE FOR NON FINANCE MANAGERS- IN PROCUREMENT
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2
KEY OBJECTIVES
The essence of financial probity in procurement
How financial statements are put together
How to interpret financial statements, robustly to identify risks and make sound decisions
Introduction to basic forecasting techniques, cost accounting and financial planning
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3
FINANCIAL PROBITY IN PROCUREMENT
The key to financial probity is to radically eliminate risks exposure to your organisationSuch risks can take the form of insolvency, liquidity shortage, delivery delays, bad publicity which could spiral into financial loss for your organisationProcurement processes should inherently manage such risk through due diligence that test viability and financial strengths of critical suppliers of high value contracts.
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4
ASSESSING SUPPLIER’S FINANCIAL STRENGTHS & SYSTEMS
What Makes a Sound Financial Management System?Book-Keeping Financial Procedures & ControlsBudgeting & Management AccountsCashflow Planning & MonitoringAuditing or Independent Examination of Financial StatementsFinancial EvaluationTimely Production of Financial Statements
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UNDERSTANDING FINANCIAL STATEMENTSThree Types of Financial Statements:
Profit and loss accounts (Income and expenditure accounts)
Balance SheetCashflow Statements
Internal & External Financial Statements:Management Accounts & Balance SheetAnnual Audited Accounts
We will cover management accounts later.
COMMON FINANCIAL STATEMENTS
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THE DYNAMIC OF FINANCIAL STATEMENTS ILLUSTRATED
GETTING TO GRIPS WITH ACCOUNTING TERMINOLOGIES
TURNOVER:Sales Income
PROFIT & LOSS ACCOUNTS/INCOME & EXPENDITURE ACCOUNTS
EXPENDITURE:Salaries
Rent/RateUtilities
InsuranceDepreciation
ASSETS:Fixed Assets
Office BuildingFixtures/ Fittings/ Equipment
Current AssetsCash/ Debtors
Short term Investments
FINANCED BY:CapitalShares
Accumulated ProfitsLiabilities
Current LiabilitiesTrade Creditors
Long Term LiabilitiesBank Loans
BALANCE SHEET
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7
THE LANGUAGE OF FINANCE – WHAT BUYERS NEED TO KNOW
Getting to grips with financial terminologylets define them now
Assets - Cash, Debtors, Stock Inventory, Land, Buildings, Equipment, FurnitureLiabilities - Trade creditors, Mortgage PayableRevenue - Sales incomeCapital - shares, accumulated profitExpenses - salaries, rents, utilities, ratesDepreciationFixed AssetsCurrent Assets
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ACCOUNTING, PRODUCING AND EVALUATING FINANCIAL STATEMENTSGetting to Grips with Financial Terminology
Prepayment Accrual Principle Balance Sheet Profit and Loss Accounts Cash flow statement Overheads
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INTERPRETING FINANCIAL STATEMENTS
Profit & Loss Account for the year 1st January 2004 – 31st December 2010
Sales (Turnover) £ 30,000
Cost of sales £ (15,000)
Gross profit £ 15,000
Overheads £ (12000)
Operating profits £ 3,000
Bank interest & other expenses £ (1,000)
Net profit £ 2,000
Tax £ (1,000)
Net profit after tax £ 1,000
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INTERPRETING FINANCIAL STATEMENTS
Balance Sheet as at 31st December 2010
Land and Building £ 15,000
Computers & Equipments £ 5,000
Current Assets £ 20,000
Debtors £ 5,000
Stocks £ 5,000
Cash at bank £ 15,000
Current Liabilities £ 25,000
Trade Creditors £ (5,000)
Net current assets £ 20,000
Long term creditors £ 20,000
Outstanding Loans £ (10,000)
Net Worth £ 30,000
Capital and Reserves £
Ordinary share capital £ 5,000
Accumulated Reserves £ 25,000
Net Worth £ 30,000
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11
EVALUATING SUPPLIER’S FINANCIAL STATEMENTS
What is financial evaluation and why evaluate your financial statements?Understanding financial risks and how financial evaluation helps in risk management
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EVALUATING FINANCIAL STATEMENTS
Key Financial Ratios:Gross Profit Margin = gross profit divided by turnover x100Net Profit Margin = net profit divided by turnover x 100Turnover Growth = current yrs turnover minus last yrs turnover
divided last yrs turnover x 100Expenditure Growth = current yrs expenses minus last yrs expenses
divided last yrs expenses x 100Working Capital = current assets divided current liabilities x 100Gearing = loans divided loans plus other capital invested (equity and
grants) x 100