Tools for Improving Competitiveness María De Los Ángeles Rivera, CPA – Partner, Kevane Grant Thornton Red de Mujeres Empresarias CCPR January 19, 2012.

Tools for Improving Competitiveness

María De Los Ángeles Rivera, CPA – Partner, Kevane Grant Thornton

Red de Mujeres Empresarias CCPRJanuary 19, 2012

San Juan, PR

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Disclaimer

DISCLAIMER: This presentation and its content do not constitute advice. Attendants should not act solely on the basis of the material contained in this publication. It is intended for information purposes only and should not be regarded as specific advice. In addition, advice from proper consultant should be obtained prior to taking action on any issue dealt with in this presentation.

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Objectives

• an overview of the different tools derived from the financial information related to the decision-making process for current and future businesses

• relationship between the financial information (reporting, financial plans) and efficient business management

• highlights of world class business management tools

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Effective business owners all know one thing...

• no matter how great your product, your service or marketing…

– if you don’t manage your money and run out of cash… it will all have been in vain

• you need to understand the fundamentals of financial management

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Effective business owners all know one thing...

• main goal – to make money

• why do entrepreneurs fail?

– they run out of money

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Categories of understanding of the entrepreneur or manager

• level one

– entrepreneur or manager knows very little or nothing about how to track the financial health of their business and use the management accounts to make wise strategic decisions

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Categories of understanding of the entrepreneur or manager

• level two

– entrepreneur or manager understands enough to be able to get someone to set up a decent financial system, to read a basic financial report and to ask intelligent questions about what he or she sees in a set of management accounts

– will usually rely on someone else to deal with the day-to-day financial details but will be party to the important financial decisions and able to identify problem areas

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Categories of understanding of the entrepreneur or manager

• level three

– background in finance and will get involved in the financial details of the business, understanding the details of every transaction and how it affects the business

– although this is useful, it is not essential – because you need to identify other areas and not get loose in the financial details

– you should be able to operate at level two

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The formula

QP +QE = SP

Quality in Planning + Quality in Execution =

Successful (Profitable) Project

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Methodology - Financial Information Dashboard – Key Performance Indicators

Day to day (source and use)

• past (historical)

– financial statements

• present

– comparative information

– decision making document

– cash flow

• future

– projected financial information

Project

Support + Execution =

Veracity – Reliability

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Reporting techniques

• Reporting

• Forecast

• Present

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Key performance indicators

General indicators (up to date and comparative to prior

period and budget)

• sales

• collections

• cash balance

• used/unused resources (capacity)

• expenses

• bottom line (net profit)

Industry specific

(depending on type of business, i.e.)

• inventory

• overhead

OWNER DRIVEN

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Key performance indicators

• extraordinary events (internal or external) –

– opportunities

– awareness

– risk

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How to put capital to work and succeed

S + A + E = $$

Solid foundation + Assertive Game Plan + Efficient Implementation = Succe$$

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“Money is the lifeblood of business”

Cash is the lifeblood of business

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Cash cycle analysis to unlockcash within your business

– to have more cash to grow in the business you need to try to:

» try to reduce the number of days in accounts receivable

» try to reduce the number of days in inventory» try to increase the number of days in accounts

payable

– within a range that is reasonable and sensible

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Decision making methodology (how to use)

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Premises

Entrepreneur

• where am I?

• what do I want?

• where am I going?

• how will I get there?

• my present relation with my company: is it working efficiently, are we developing our outmost potential?

Enterprise

• where are we?

• what do we want?

• where are we going?

• how will we get there?

• present company scheme: is it working efficiently, are we developing our outmost potential?

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3600 vision of the business

• local and global vision

• own vision

• my team's vision

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Three elements of a business

• infrastructure

• decision making structure

• people

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Business virtuous cycle

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Questions…