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Finance Roadmap example

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Finance Roadmap example

  1. 1. Masters Accounting & Training Solutions FINANCE ROADMAP FOR COMPANY X JULY 2016
  2. 2. COPYRIGHT©2016 KIM MASTERS Page | 2 CONTENTS Introduction ........................................................................ Page 3 Investigations and observations ...................................... Page 4 Introduction Page 5 General finance systems & procedures Page 6 Advantages/disadvantages of working with excel Page 6 Budgets Page 7 Flow chart of current budget process Page 8 Controlling overhead supplier costs Page 9 WIP & Cost of Sales Accruals Page 9 Debit/Credit Card Spending Page 10 My Money Programme Page 10 Billing Tracker Page 11 Finance Controls Page 11 Finance Staffing Page 12 Recommendations............................................................... Page 13 Quick Wins Page 14 Why Use Paprika Page 15 How to use Paprika better & like it better Page 16 Paprika Training Page 16 Building & testing new budgeting process Page 17 Flow chart for doing budgets on Paprika Page 17 WIP & Cost of Sales Accruals Page 18 Debit/Credit Card Spending Page 18 Billing Tracker Page 18 Summary.............................................................................. Page 19 The End Page 19
  3. 3. COPYRIGHT©2016 KIM MASTERS Page | 3 INTRODUCTION The MATS Finance roadmap is a snapshot of your finance business systems; which investigates where you are now and makes recommendations based on three criteria – saving you time, saving you money and helping you work smarter, not harder. Current systems are rated in the following categories: Good Bad Ugly With this roadmap my aim is the following: 1. To investigate the advantages and disadvantages to Company x of the current finance systems and procedures. 2. To analyse how the current systems and procedures are impacting both time and money savings. 3. To show how working smarter, not harder is the way forward for the finance department, the account teams, and for the management of Company x 4. To make recommendations which offer immediate wins, 5. To make medium/long term recommendations which can make substantial time and money savings to the company
  4. 4. COPYRIGHT©2016 KIM MASTERS Page | 4 INVESTIGATIONS AND OBSERVATIONS
  5. 5. COPYRIGHT©2016 KIM MASTERS Page | 5 Introduction What I have done to reach my observations: 1. Worked in the finance department from 4th May to end June 2016, 2. Looked at the current excel budget template, the excel budgets, and the budgets which were put on Paprika in 2011, 3. Attended a company meeting on the first week of my time in Company x, 4. Worked with the team to understand their current processes and plans moving forward, 5. Spoken to account executives about the current budgeting process, 6. Spoken to CEO about their vision for the company (work smarter, not harder) 7. Seen how much time the accounts team and account directors spend on budgeting 8. Calculated how much time I spent on a weekly basis checking the formulas and calculations on the budgets
  6. 6. COPYRIGHT©2016 KIM MASTERS Page | 6 Generalfinance systemsand procedures: Currently, your finance systems and procedures are very manual and time consuming. There is much duplication going on at all levels of finance; from budgeting, to credit cards, from sales forecast spreadsheet, to the wip process. This affects the finance team, and also everyone in the accounts teams. The great thing about Company x is that you are striving for excellence in many other areas, but this is one area which lets you down. Currently, the finance team works harder, not smarter, and this will not change unless you take a good look at your systems and procedures. In my 18 years working in London for big corporates and many small to medium sized companies; every one of them made use of their accounting system to make life easier (some do this better than others.) The junior finance assistant is doing a great job of making sure everything gets done, but although she makes it looks like she’s coping, I believe that when you get a new person in to do her role that they will struggle to get the work done in the time. It’s not that the role needs overtime, but with the way things are working at the moment; it’s a very big role for one person to do. The Financial Director is putting some great controls in place, but unless you start using either Paprika, or an alternate system you will not be able to grow in the way you want. Advantages of working with Excel 1. The team are used to working in excel, 2. The team know the current processes, 3. Information to be inserted, laid out, formatted and arranged for maximum readability with relative ease. 4. Easy computation of budgetary estimates i.e. calculation of income and expenditure items 5. Quick and easy modification of figures with instantaneous results 6. Transmission of budget workings between work colleagues, 7. Long term storage of workings to enable others in future years to follow how budgets were calculated 8. Great tool for a small team and a limited number of budgets Disadvantages of working with Excel 1. Very manual and time consuming 2. When someone else is in the spreadsheet you can’t use it, 3. 5/6 excel sheets to check every time you make a change, 4. If you need any budget info, you need to contact the budget holder to find out the most recent version of the budget and what is the correct budget, 5. Labour intensive, 6. More prone to make errors Company x of length and complication of excel spreadsheets 7. With so many people working on the budgets it’s very difficult to control and track the different versions and know what’s the final version, 8. Every time there’s a change the whole budget needs checking 9. Problematic to clarify, analyse and control a medium sized business with excel 10. If you keep working with excel things will stay the same
  7. 7. COPYRIGHT©2016 KIM MASTERS Page | 7 Budgets Currently all budgets are started, completed and amended in Excel. This process is one of the most time consuming and manual systems for raising budgets that I have ever seen. There is massive room for error Company x each budget has at least six excel spread sheets which are all linked and have countless data lines on each sheet. It is also one of the most time-wasting ways of raising budgets that I have worked with. Having the budgets in excel means that the information is very difficult to control, to analyse and to get clarity around In a four day week, I check on average 10 budgets, which on average take an hour each. This means 10 hours of my time is taken up checking formulas and making sure everything is linking properly. You are paying me approximately £275 per week to make sure that everything adds up ok. That’s £1,100 per month. Impact on time and money savings: 1. 10 hours per week spent checking and re checking budgets, 2. £1,100 of finance managers salary paid for checking formulas and adding up rows, 3. Account teams wasting at least 15 mins per day on checking budgets on excel (at least an hour a week wasted doing this), 4. Account directors wasting time (15 mins per day) checking and rechecking budgets on excel (at least an hour a week wasted doing this), 5. Budgets wait from ½ to 1 day to get to clients due to checking by finance (could they be agreed sooner?) 6. With the account team and account directors spending at least one hour a week on these tasks you are losing 15/20 chargeable client hours a week. MATS Rating: UGLY 33% 17%20% 20% 10% CHECKING BUDGETS SALES FORECAST/GAP DEBTORS SALES INVOICES OTHER
  8. 8. COPYRIGHT©2016 KIM MASTERS Page | 8 Flow chart of current Excel Budget process 1. Speak to the clientand findout what their budgetfigureis 2. start putting numbers together: Look at rate card Get 3 quotes for 3rd party 3. Build excelbudget 4. Get AD to check it (withbig budgets at least 30mins checking formulas) 5. Get financeto check it (with big budgets at least 30mins checking formulas) 6. Send top linesummary to client 7. Client negotiates changes. Budget V2 created 8. Job complete: reconcilebudget on excel which couldtake upto 4/5 hours for thebig budgets There couldbe between5-10+ changes to the budget which hasto be checked by finance each time With 5 versions ofa big budget this couldbeup to 5 hours ofchecking, depending on the extent ofthechanges
  9. 9. COPYRIGHT©2016 KIM MASTERS Page | 9 Controlling OverheadSupplierCosts Melanie is doing a great job of comparing all of the main supplier costs and of getting better deals. She is very dedicated and is chasing down all of the relevant information and meeting with suppliers; to understand where savings are possible. She is helping to ensure savings on all levels of supplier costs. Impact on time and money savings: 1. Melanie has helped to make savings on overhead costs such as rent, insurance, computer costs, 2. These have both a monthly impact, but a longer term impact on the bottom line, 3. This ensures costs are as streamlined as possible and all possible controls are in place to make savings MATS Rating: VERY GOOD WIP and Cost of Sales Accruals Currently you calculate WIP and Cost of sales accruals through a hugely complicated and long spreadsheet which nobody understands properly. It is both time consuming and very confusing. The WIP and COS are very important to get right as they affect your cost of sales for that month and therefore the bottom line. At the moment there is an element of guessing around these figures. Impact on time and money savings: 1. This process actually impacts the cost of sales figures and thus affects clarity around the strategic decisions made upon the monthly figures, 2. This makes it difficult to calculate the actual monthly total gross profit and analyse variations to budgeted gross profit, 3. This process probably takes double the time it should take, 4. You can’t make improvements on a number you’re not clear about. If you don’t know what the actual total gross profit is how can you make necessary adjustments to control it? 5. This makes the junior finance role take so much longer than it should take. MATS Rating: UGLY
  10. 10. COPYRIGHT©2016 KIM MASTERS Page | 10 Debit/CreditCard Spending At the moment, this is also a bit of a guestimate as most people (when they use things like Amazon and other automatic ways of paying) don’t tell finance the details and so they have to guess what the entries relate to. This impacts the costs on the jobs and the end of job analysis. This is also too manual, as the team fill out forms to tell finance what they have spent. Finance then inputs it into the system, so it’s another case of duplication. Impact on time and money savings: 1. Duplication of process (account teams could input directly into Paprika) 2. This would save the Junior finance member between one and two hours a month, 3. This also impacts the analysis of job spending and on job costings, as there is an element of guessing, 4. How can you control credit card spending and job costs when you don’t know properly what is being spent on which projects? MATS Rating: BAD My MoneyProgramme This is being run to educate all employees on the financial impact of their financial decisions within the company. They are being taught about the value and impact of every decision they make with regard to chasing sales invoices, getting PO’s raised, paying suppliers and getting quotes on jobs. This mindset means that the employees learn to treat the company money as if it was their own. Impact on time and money savings: 1. This teaches employees to think differently and to act differently in relation to the company’s money, 2. They are rewarded if they make substantial savings on project costs, 3. This will have impact on money savings and cash flow in the short & long term 4. Even if each employee manages to save £20 on a quote (based on 20 employees) every month, then that’s £400 per month of savings (£4,800pa) MATS Rating: VERY GOOD
  11. 11. COPYRIGHT©2016 KIM MASTERS Page | 11 Billing Tracker This is another case of heavy manual work and duplication. This spreadsheet is a very difficult thing to control as the information is constantly changing and there are no controls to see if the data is accurate or not. If budgets and billing schedules were in Paprika this could be downloaded to excel and created accordingly. This process could be made half as time- consuming as it is and you could add controls, so that there is less room for error. Impact on time and money savings: 1. This takes the finance manager at least 3 hours a week (costing £81pw and £324pm) 2. I believe that this could be cut by ½ if the information was on Paprika and process was put in place to export and organise the information from Paprika, 3. There would be more control and accuracy doing it this way and thus any decisions taken using this information would be based on more clear and accurate information. MATS Rating: BAD Finance Controls The Financial Director has been implementing more and more financial controls every week. Things like the account teams telling finance in advance of needing to do a budget and listing all of the budgets done on a weekly basis. Also things like updating and clarifying the Gap Analysis. These give more control over what you do and when you do it, make sure that new budgets don’t get missed on the billing tracker and make the financial gap information easy to read and to take action over. She has also been talking about getting the account teams to do a cash flow sheet for every active job they have, so that you can see when the client money will come in, and see when the supplier costs will go out. Impact on time and money savings: 1. These controls will ultimately save both time and money and make the decision making process clearer and quicker, 2. Financial controls make an impact in the short term, medium term and long term MATS Rating: VERY GOOD
  12. 12. COPYRIGHT©2016 KIM MASTERS Page | 12 Finance Staffing 1. Full time Finance Assistant (Jordan) 2. Full time Commercial Manager (Hannah) 3. 1 ½ day a week Finance Director The way things stand with the systems and procedures the full time finance assistant is overloaded and needs some help. I believe that when the cover comes in for that role they will struggle to do what Jordan has been doing. Currently this is a role for 1 ½ people. The Finance Manager (commercial manager) role spends 33% of their time checking budgets and with new systems could be freed up to do other things. There is too much pressure on the two operational people within the department, and if one of them is off sick, or on holiday this creates stress and backlogs which take weeks to recover from. The Finance Director is currently in for a day and a half which is very pressuring for her and while she is doing the best she can in the time she has and creating great controls, she needs to be in more often to make the impact she wants to make. Impact on time and money savings: 1. The finance team is working harder, not smarter and as a result currently should have two full time members, one part time helper and a part time finance director, 2. If things continue as they are the junior finance role will be overwhelmed and there will be problems as a result of this, 3. If there are problems due to this, you may need additional temporary help which will add cost. This could add more costs to the finance function of Company x in the next six months, 4. The senior finance role will get frustrated due to the nature of the finance systems and processes and the risk of error in the current systems and may decide to leave as a result. This will affect consistency in the department MATS Rating: BAD
  13. 13. COPYRIGHT©2016 KIM MASTERS Page | 13 RECOMMENDATIONS
  14. 14. COPYRIGHT©2016 KIM MASTERS Page | 14 QUICK WINS: 1. Job numbers should be raised at the beginning of the budgeting process and used in all correspondence on the budget. This will save time in all phases of the budgeting process, 2. When budgets are finalised, they should be saved with an appropriate name i.e. final xxx budget and saved in a final budget folder. This will save confusion and countless emails and telephone calls to try to figure out which is the final budget, 3. Doing this will also save time when raising sales invoice as it will be clear what the correct amount and narrative is for the sales invoice, 4. PO information should be emailed in a more clear a format to clarify the PO number and the amount that should be raised in the sales invoice for the particular period. It is very long winded to have to find the right budget and then try to figure out which billing schedule is the correct one to use, 5. While still using excel budgets, all of the formulas in the excel templates should be protected to save having to be check time and time again
  15. 15. COPYRIGHT©2016 KIM MASTERS Page | 15 WHY USE PAPRIKA? 1. The team are familiar with it and just need to learn to use it to work for them better, 2. There is no need to reconcile and transfer opening balances to a new system which can be time consuming and tricky, 3. There is no cost of implementing a new system (can be thousands of pounds) 4. It is not a perfect system, but it works and no system I have worked with is perfect, 5. When you are trained on a new system they don’t customise the training to you, your business and your processes (it is general training) 6. I know your business, your people and your processes, so can tailor the system and training to your needs and your business 7. Rates are automatically calculated, 8. Once the info is in Paprika you can organise it in the job browser and then export to excel Companies I have worked with who use Paprika well are: 1. RPM Ltd (worked with them for 3.5 yrs) 2. Red House Lane (worked with them for a year) 3. Meteorite Marketing (worked with them for a year) 4. Salter and Baxter (contract for 6 weeks with them) 5. MJL Marketing (worked with them for a year) 6. ThinkHouse Ireland (worked with them for 5 months) 7. Velocity (worked with them for 4 months contract) Impact on time and money savings if you use Paprika: 1. There is no time cost of bring through the new balances (which is what you would have to do with a new system, 2. A new system could cost you up to £15,000 which you would save if you use Paprika, 3. The users already know the system, they just need to be taught how to use it in a way that works for them (training will be less time consuming than starting with a new system and will be less disruptive than starting from scratch on a new system) 4. Using paprika for budgets you can save at least 15mins a day for each of the account team members that’s about an hour a week which can be saved. That could save you 20 hours per week. 5. Reconciling the budgets on Paprika would also save time as the process you use at the moment is very confusing and time consuming
  16. 16. COPYRIGHT©2016 KIM MASTERS Page | 16 HOW TO USE PAPRIKA BETTERAND LIKE IT BETTER: SHOW & TELL PAPRIKA WORKSHOPS At the moment, the Account Directors and Account teams hate Paprika and as a result they would prefer to use excel to budget and to do the budget reconciliations, even though it is a time consuming and painstaking process, prone to user error. 1. I propose a discovery session with the account directors and then possibly separately with the account teams to find out why they hate Paprika and how it has failed them, 2. Then a second session (possibly a bit longer) to show the account directors and the teams how it can work for them and save them time from the way they are doing things at the moment, 3. In the second session a training approach and schedule can be agreed and decided upon to help everyone get up to speed with Paprika and how to use it for Company x budgets and reconciliations. We can work out the best way to get people trained and confident on the system and the best way to structure the budget templates PAPRIKA TRAINING This needs to be done in a time effective way to help all of the team understand the process and how it will help them with their jobs. The training should be done to fit into the working day of the teams and should cover both individual and group trainings. I would recommend: 1. User guides 2. Question and answer sessions 3. Help line for a certain amount of time a week 4. Paprika champions from within the company 5. Paprika skills would be a prerequisite in the job reviews, and users would be rewarded for being experts on the system.
  17. 17. COPYRIGHT©2016 KIM MASTERS Page | 17 BUILDING AND TESTING NEW BUDGETING PROCESS If you look at my flow charts of doing the budgets on excel and doing them on Paprika, then you will see that I estimate at least 3 hours of savings (probably more) on the big budgets. What I would like to do is to build the budget templates on Paprika and look at the excel component. I would do a few test budgets and get some of the account team to do the same so we can test out the new process. We can make amends and improve the process at that point. Then we train the team and start on making the savings! FLOW CHART FOR DOING BUDGETS ON PAPRIKA 1. Speak to the clientand findout what their budgetfigureis 2. start putting numbers together: Look at rate card Get 3 quotes for 3rd party 3. Build client parameters on excel (do all ofthe reston paprika) 4. Build budget using paprika template(this willbe themost time consuming step) 5. AD to do a sensecheck and to check the overall numbers (with big budgets atleast30mins less checking) 6. Financecan check ifnecessary at this stage(withbig budgets at least 30 mins less checking 7. Top line summary to client 8. job reconciliation frompaprika without needing to check formulas andlinks. This willtake less timethan onexcel In my opinion, finance only need tocheck once and the AD check the changes Ifthere are5 versions and finance only check thefirst version,then AD: 30 +15 +15 +15 +30 Finance:30 Total time: 2.15 hours
  18. 18. COPYRIGHT©2016 KIM MASTERS Page | 18 WIP and Cost of Sales Accruals This process can be done and managed on a monthly basis using Paprika and conversations with the account teams. There is a report in the job reports icon called WIP Period movement and this can be printed off and can be run through with the account teams to make sure which costs can be written off in the current month. Then these can be written off using the Job Profit Review module in Paprika and will provide a more accurate idea of cost of sales in the current period. There is also a method for deferring income within the job profit review. This will save the time and confusion of the existing WIP spreadsheet. Debit/CreditCard Spending Instead of manually filling out a form for credit card spending the credit card lines can be automatically entered into Paprika every time someone spends on a card. This means at the end of the month, the junior Finance Assistant will only need to check the credit card entries on Paprika with the credit card statement. People should not be able to spend on the card without doing this. This will save both time and money as it will be both a finance control and save on duplication. This will also save time as the account teams are the ones who know the job and details of what they are spending and it takes Jordan time to figure out what each of the entries relate to and what job they relate to. Billing Tracker Once the budgets and billing schedules are on Paprika, then the billing tracker excel sheet can be created using a bespoke Job Browser report in Paprika. The job browser can be set up to include the gross profit of everyjob (whether pitch or live) and then can be set to include any other info (time + cost info.) This can be downloaded every week into excel and used with the NBUS tracker and Gap analysis to drive both new business and billing. It may take some time to set up the job browser and work out a quick way of building the spreadsheet in the way you want, but once it is set up, it will be quicker and easier than it currently is.
  19. 19. COPYRIGHT©2016 KIM MASTERS Page | 19 SUMMARY As I have mentioned before that Company x is striving for excellence in many other areas of their business and finance is the one area which has been neglected up to this point. With the appointment of the FD there are many great financial controls being implemented, with Melanie’s work on supplier savings and the MY MONEY initiative there are many exciting improvements taking place on the finance front. However, the finance department are currently working harder, not smarter and with a finance system that is not being used and much duplication of tasks; this is an area that could do with a revamp and could make both time and money savings to the company. Through changing the budgeting process Company x stands to gain 20 extra account team hours per week and at least 5 hours per week of the WIP finance person’s time. There are many more time and money savings to be made on processes such as WIP/Cost of Sales, Credit cards, Billing Tracker and job reconciliations. With a bit more investigation other finance processes could be streamlined and further time and money savings made. All of this would free up finance time, make the process less error prone and mean that the two full time finance employees would be more productive, happier and better employed. All in all this work would make big time and money savings for the company and bring the finance team in line with the excellent processes and procedures being implemented in the rest of the company. ***THE END*** “Rivers know this: There is no hurry, we shall get there someday.”

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