Resource documents and tools

We have gathered tools and materials here that explain the nuts and bolts of financial management step by step from an overview of the basics through to more detailed notes on specific elements.

These notes should also demystify most of the terminology you are likely to encounter when meeting bankers, investors and other finance professionals.

Index:

a) Financial Management: Summary of key elements

b) Financial Management –  Phases of Development

c) Governance: Establishing an effective board

d) Using Customer Business Cases to sell effectively

e) Financial Statements

f) Understanding financial analysis

g) Shareholders Agreement – purpose and key issues to address

h) Financial Leadership – the difference between a CFO and a Financial Controller

 

 

a) Financial Management: Summary of key elements

This note financial management in growing business summarises the financial management structures and processes you have to establish to get your business off the ground on a sound footing. It is particularly relevant to high growth businesses – good financial governance is all the more important if you are growing as cashflow pressures inevitably arise.  However even for a business with no growth aspirations, sound financial management is always highly beneficial to improve your profitability and reduce your stress! financial management in growing business

As your business develops you will need more sophisticated decision making and reporting systems as well as governance frameworks to ensure that decisions are made within an overall structure that protects the interests of key players..

b) Financial Management – Phases of Development

The first note explains financial management structures generically. The reality is however that at the very early stages you have very little financial support, but that as the business grows you need to upgrade the financial processes and systems to develop in parallel. This note financial-management-phases-of-development tracks what you need to focus on as regards financial management as your business goes through the various phases of growth from a very simple idea through to mature cash generating company.

c) Governance: Establishing an effective board

It can be difficult for a small company to establish disciplined processes and deal with the myriad concerns that arise from HR to legal, to operational challenges and dealing with funders. A board can be a highly effective way to both establish a clear framework for decision making and to bring in specialist expertise in areas that the full time management team may lack. Boards can be established either with full statutory powers and responsibilities or on a more light touch basis as an advisory board where the emphasis is on bringing in key skills. This note 16 Effective Boards explains what a board does, how to set one up and gives detailed insight into how to run the board to make it as effective as possible.

d) Using Customer Business Cases to sell effectively

Customer business cases are a good example of the application of the tools of finance to support another area of the business, in this case the selling process. This note 1 Customer Business Cases explains what a customer business case means, and why they can be extremely powerful as a selling and relationship building tool.

e) Financial Statements

Financial Statements (the Income Statement, Cashflow and Balance Sheet statements) are standard reports all companies have to produce that show both performance in the relevant period (Income Statement and Cashflow), and also useful information to get a sense of the overall financial position of the company (the Balance Sheet).

Much of the terminology that puzzles people from outside the finance community appears in the financial statements – from EBITDA to deferred income the jargon of accounting can be incomprehensible without a guided tour. This note Financial Statements and Accounting Standards seeks to demystify the statements starting with a simple explanation of the key elements and purpose of each statement and then explaining the main terminology you are likely to encounter no matter where in the world your work.

f) Understanding Financial Analysis

Financial analysis is the process of using financial data to assess a situation with a view to making a more informed decision. Financial analysis primarily refers to the interpretation of financial statements to assess the overall health of the company and the financial performance in recent years. It is useful to examine trends in performance and to compare against other peer businesses in a similar sector. The overall purpose is to answer common sense questions about the company under analysis:

  • Is the financial position sustainable, for example is the company carrying too much debt?
  • Has the company generated adequate levels of profit in recent years? What is the trend direction?
  • Has the company generated adequate levels of cashflow in recent years, and again what is the trend?
  • What are the imminent prospects for the company – is it likely to grow and prosper in the near future?

Ratios (where we compare one number against another) are the tools that are used to answer these and many other questions. This note FINANCIAL ANALYSIS explains the approach and the tools of financial analysis in more detail.

This note follows on logically from the previous note on financial statements.

g) Shareholders Agreement – purpose and key issues to address

Many small businesses neglect to establish a clear Shareholders agreement and only discover when conflict arises that this can be a fatal mistake. This note Shareholders Agreement Generic Summary and comments (1)-2 explains the overall purpose of a shareholders agreement and the key provisions you must include explaining the purpose of standard provisions such as drag along and tag along provisions and how these protect the overall interests of the shareholders and the company.

 

h) Financial Leadership – the difference between a CFO and a Financial Controller

As companies grow the stars get higher, the risks get bigger, the amount of capital needed gets more challenging to raise and managing the finances and the finance team gets considerably ore complex. This note CFO vs FC role descriptions explains the difference between a Financial Controller and a CFO, explaining the trigger circumstances that would cause a company to upgrade financial leadership to the CFO level.

I hope you find this useful.

 

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