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 Purchasers

1. B USINESS F INANCE F OR N ON
F INANCE M ANAGERS - I N
P ROCUREMENT
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2. K EY O BJECTIVES
 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. F INANCIAL P ROBITY I N P ROCUREMENT
 The key to financial probity is to radically eliminate
risks exposure to your organisation
 Such risks can take the form of insolvency, liquidity
shortage, delivery delays, bad publicity which could
spiral into financial loss for your organisation
 Procurement 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. A SSESSING S UPPLIER ’ S F INANCIAL
S TRENGTHS & S YSTEMS
What Makes a Sound Financial Management
System?
 Book-Keeping
 Financial Procedures & Controls
 Budgeting & Management Accounts
 Cashflow Planning & Monitoring
 Auditing or Independent Examination of Financial
Statements
 Financial Evaluation
 Timely Production of Financial Statements
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5. C OMMON F INANCIAL S TATEMENTS
UNDERSTANDING FINANCIAL STATEMENTS
Three Types of Financial Statements:
 Profit and loss accounts
(Income and expenditure accounts)
 Balance Sheet
 Cashflow Statements
Internal & External Financial Statements:
 Management Accounts & Balance Sheet
 Annual Audited Accounts
We will cover management accounts later. 5
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6. T HE D YNAMIC O F F INANCIAL S TATEMENTS ILLUSTRATED
GET TING TO GRIPS WITH ACCOUNTING TERMINOLOGIES
PROFIT & LOSS ACCOUNTS/INCOME & EXPENDITURE ACCOUNTS
EXPENDITURE:
Salaries
TURNOVER: Rent/Rate
Sales Income Utilities
Insurance
Depreciation
FINANCED BY:
ASSETS: Capital
Fixed Assets Shares
Office Building Accumulated Profits
Fixtures/ Fittings/ Equipment Liabilities
Current Assets Current Liabilities
Trade Creditors
Cash/ Debtors
Short term Investments Long Term Liabilities
Bank Loans
BALANCE SHEET
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7. T HE L ANGUAGE O F F INANCE –
W HAT B UYERS N EED T O K NOW
Getting to grips with financial terminology
lets define them now
 Assets - Cash, Debtors, Stock Inventory, Land, Buildings,
Equipment, Furniture
 Liabilities - Trade creditors, Mortgage Payable
 Revenue - Sales income
 Capital - shares, accumulated profit
 Expenses - salaries, rents, utilities, rates
 Depreciation
 Fixed Assets
 Current Assets
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8. A CCOUNTING , PRODUCING AND
EVALUATING FINANCIAL STATEMENTS
Getting to Grips with Financial Terminology
Profit and
Accrual Balance Cash flow
Prepayment Loss Overheads
Principle Sheet statement
Accounts
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9. I NTERPRETING F INANCIAL S TATEMENTS
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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10. I NTERPRETING F INANCIAL S TATEMENTS
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. E VALUATING S UPPLIER ’ S F INANCIAL
S TATEMENTS
 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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12. E VALUATING F INANCIAL S TATEMENTS
Key Financial Ratios:
 Gross Profit Margin = gross profit divided by turnover x100
 Net Profit Margin = net profit divided by turnover x 100
 Turnover Growth = current yrs turnover minus last yrs turnover
divided last yrs turnover x 100
 Expenditure Growth = current yrs expenses minus last yrs expenses
divided last yrs expenses x 100
 Working Capital = current assets divided current liabilities x 100
 Gearing = loans divided loans plus other capital invested (equity and
grants) x 100
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