M8 - Setting up finance function irrespective of the size of the business
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The document outlines the essentials of setting up a finance function within a business, detailing key components like financial planning, capital allocation, and performance metrics. It emphasizes the importance of establishing clear financial goals, understanding the difference between finance and accounting, and maintaining robust financial controls to support business decision-making. Additionally, it advises on building an efficient finance team and provides best practices for managing financial tasks.
M8 - Setting up finance function irrespective of the size of the business
- 1. How to set up the Finance Function
- 2. Precious Mvulane Chartered Accountant Registered Auditor Serve in 10 Boards, chair 5 Lifetime student of business since 14 years Won few awards and recognitions. Module 8 2
- 3. Understand finance as subject and function in a business Understand the finance activities and KPIs Identify information you need to manage and make decisions in your performance Identify the differences between finance and accounting Differences between management accountant and a financial accountant Complete routine financial tasks 3
- 4. The World of Finance © 2014 The Essential Finance Handbook for entrepreneur
- 5. Financial Goals and Strategy Module 8 5 What do you need in terms of money ? How are you going to get it? 1. What type investments do you need cash for ? What is funding model? 2. For short term i.e. working capital how you going to manage cash flow 3. Cost of capital vs the return on the venture ? Does it make it viable business?
- 6. Finance must be linked to Goals Step 1 - Set up a Goal/Target - including KPIs in finance we have only 4 elements Income, Expenditure, Assets and Debt, remember you keep top, increasing and bottom decreases. Know your baseline which current.
- 8. Module 8 8 Making financial decisions is really about understanding ROI i.e bottom line - profit
- 9. What is Finance Function The finance function can simply be taken as the tasks of providing funds needed by an enterprise on favourable terms, keeping in view the objectives of the firm. 9
- 10. 10 The finance function includes judgments about whether a company should make more investment in fixed assets or not. It is largely concerned with the allocation of a business’s capital expenditure over time as also related decisions.
- 11. •Financial planning; •Forecasting cash inflows and outflows; •Raising funds; •Allocation of funds; •Effective use of funds; and •Financial control (budgetary and non- budgetary). 11
- 12. Finance Function – Corporate Finance Investment Decision Allocate capital to long term assets i.e. capital budgeting or capex. It is important to allocate capital in those long term assets so as to get maximum return. This can be short term too Following are the two aspects of investment decision a) Evaluation of new investment in terms of profitability b) Comparison of cut off rate against new investment and prevailing investment. Financial Decision Mod 8 12 2021 Financial decision is about when, where and how should a business acquire funds. Funds can be acquired through many ways and channels. Broadly speaking a correct ratio of an equity and debt has to be maintained. A business tends to benefit most when the market value of a company’s share maximizes this not only is a sign of growth for the firm but also maximizes shareholders wealth.
- 13. Dividend Decision Finance Function – Corporate Finance 13 • Earning profit or a positive return is a common aim of any the business. But the key function of finance role in profitability • Decide whether to distribute all the profits to the shareholder or retain all the profits or distribute part of the profits to the shareholder and retain the other half in the business.
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- 18. Why it is important to set up the Finance Function? •Charge the correct selling price •Set targets that are measurable •Know which resources you need to build your business 18
- 19. Finance Priorities Promote strong governance and control in the organization 19 Facilitate improvements in control in the business Design an appropriate financial control framework Meet increasingly onerous statutory and regulatory requirements i.e. compliance risk Promote management of financial risk to the business
- 20. Finance Priorities Be effective in driving forward the business Deliver an effective finance support service to business units or functions or department 20 Provide challenge to the business to meet its objectives Strengthen business decision making throughout the business Add value to the business i.e increase value or return on investment Provide timely and accurate reporting and business information
- 21. Finance Priorities Be efficient in the operation of the finance function 21 Reduce the costs of the finance function Realize benefits of investments in finance Integrate finance to all business functions Streamline business processes including reporting
- 22. • Banks – some even have accounting software to use for free • Apps – free software including open source • Incubators • Consulting Firms including Accounting and Tax Firms provide trainings • Training Companies provide interns and free training • FASSET – Provides interns in finance • SARS provide free trainings Module 8 22 Building your finance team
- 23. Financial Plan Business Plan – with cash flow projections for atleast 5 years Module 8 23
- 24. 1.Have your own accounting system which you use to capture invoices 2.Get bookkeeper or accountant to reconcile monthly 3.File documents in the cloud 4.Back up records on weekly basis 5.Get accounting system that suit your industry Module 8 24 Accounting
- 25. Set Tasks in a periodic manner • Daily Checklist • Monthly Checklist • Semi- Annual • Annual Checklist 25 As a Business Owner one need to have a system to ensure Accountability
- 26. Full Details of checklist 26
- 27. Conclusion As a serious business owner, you should not appoint random staff who do not have the professional qualifications to manage their job