SMDP A Financial Refresher MODULE 4
- 1. A Financial Refresher MODULE 4 The Big Picture (How all this works) Introduction How Systems Produce Financial Reports Other Business & Microfinance Reports Essentials of Sound Reporting Next Steps
- 2. Introduction Why do organizations need financial reporting systems? Systems are necessary for producing reliable reports that management can use to help them: • Understand and evaluate the organization’s financial position • Understand and study the business implications • Make decisions to improve financial performance • Safeguard and enhance internal controls • Achieve accountability among staff
- 3. Producing Financial Reports Financial Data Goes Through Three Stages A reporting system can be designed to look at three different stages Transactions (Input) System (Processing) Activity: FlashCard Practice Data/ Information (Output)
- 4. Producing Financial Reports Transactions stage: The system recognizes unprocessed facts that do not give insights to management Processing stage: The system applies a set of policies and procedures that enable organizations to categorize and record transactions consistently Output stage: Reports are produced that give insights and help in making decisions. This same concept applies to accounting or any other report producing system. Transactions (Input) Unprocessed facts that do not give insights System (Processing) Set of policies & procedures that enable organizations to proess transactions consistently Activity: FlashCard Practice Data/ Information (Output) Processed facts that give insights and help in making decisions
- 5. Financial Report An Example An Example: Processing a Utility Invoice Transactions: An invoice is entered System: The invoice is run through a series of policies and procedures Information: A report is run to view the impact of expenses for month or year etc. (output) Transactions (Input) Payment of Utility Invoice System (Processing) Utility invoice to be charged to account code XXX. Before paying, the accountant should verify the utility account # and organization name, period, etc…adhere to policies and procedures Data/ Information (Output) For example, an Expenses Report is generated for the month and compared with the prior month and the same month of the prior year
- 6. Financial Report An Example Let's look at the same three stages in detail Transactions: A payment is made Systems: Accountant staff will process the payments in accordance to the structure of the chart of accounts, record it in Journals etc... Information: The organization will be able to produce financial statements such as a Balance Sheet, Income Statement and a Cash Flow Statement
- 7. Other Reports Other Reports In addition to the three key finanical reports (Balance Sheet, Income Statement, Cash Flow Statement) and depending on the type of business or entity, additional financial reports would be required by management. A typical business may need: • Expenses analysis report • Sales Report • Break down of income from portfolio • Source of funding analysis • Number of loans in each area for each product • Portfolio reports • Stock Analysis • Non-financial data reports
- 8. Essentials of Sound Reporting The essentials of sound reporting include: • A well designed Chart of Accounts and ledgers • Sufficient policies and procedures for keeping records consistent and up-to-date • Skilled personnel • A sound system for monitoring clients’ accounts Activity: FlashCard Practice
- 9. Next Steps... Once you have finished reviewing these slides you may proceed to the following sections of this Module (if you opened these slides in a separate window, close out this window or tab and return to MODULE 4 in CourseSites): • Review the Resources • Complete the FlashCard Review • Check your understanding with the Self-Review Note: A PDF version of this slide deck is also available for download Founded in 1999 as the Microenterprise Development Institute, the Carsey Institute’s Sustainable Microenterprise and Development Program (SMDP) provides training and networking opportunities for practitioners in the fields of microfinance, enterprise development, social enterprise, and community-based and rural development. Over the past fourteen years, we have trained more than 1,800 practitioners from more than one hundred countries around the globe. The SMDP offers an intensive professional training experience with a concentration on program planning and implementation of client and community inclusive economic development strategies. http://carseyinstitute.unh.edu/smdp