TLIP5035A Presentation 12

PRESENTATION 12: REPORT OUTCOMES OF FINANCIAL PLANS

PRESENTATION 12 OUTLINE

The following areas are covered in this presentation:

• Directing the Financial Performance Report

• Non-Financial Objectives Report

• Strategies and Plans are Reviewed and Updated

• Performance Reports

• Implement and Monitor Agreed Improvements

DIRECTING THE FINANCIAL PERFORMANCE REPORT

• Tailoring the report to your intended audience is important.

Common features in all reports however should show the bottom

line i.e. did the company meet its targets and goals? For an

interim report such as a half yearly, is the company on track or

within budget?

• The actual performances of an organisation are reported and used

by management to:

− Monitor performance in relation to the budgets

− Make decisions

− Plan for the future


• Corrective action in the form of contingency plans or adjustments

to budgets may result from the financial report, so if there are to

be amendments then they need to be clearly stated and directed

to the correct target audience

• All reports, no matter for whom they are intended, must

demonstrate the following properties:

− Accuracy

− Completeness

− Understandable

− Timely

− Forward thinking

DIRECTING THE FINANCIAL PERFORMANCE REPORT• Reports can be periodic, progressive or specific. A periodic report is

written at predetermined times and reflects the performance of the

organisation for a set period.

• A progress report is prepared and the timetable for the completion of

future work is provided. A specific report is produced on request for

a specific purpose

• The internal performance report is a management tool used for

planning and controlling. This is prepared at set intervals determined

by management. The timing of these reports is important if they are

going to serve the purpose they were written for.

• The recipients of reports are the members of staff who hold positions

of responsibility and who will be expected to take any remedial

action required.

DIRECTING THE FINANCIAL PERFORMANCE REPORT• Qualitative factors also an important role in the planning process of an

organisation. It can be difficult to measure qualitative factors as these

factors include such things as quality standards, customer service, and

market share.

• The budgets and financial plans contain all the details of the planned

allocation of the resources of the organisation. The information gathered

on the financial performance of the organisation is analysed and reported

in appropriate language in order for any necessary remedial action to be

taken.

• The data collected, on which the reports are based, needs to be accurate.

For this to happen, the financial records need to be adequately

maintained.

• An internal audit forms part of the internal control process, and is

undertaken to check the processes and record keeping highlighting any

areas of concern.


• All source documents should be checked for validity according to

the approval and authorisation processes in the organisation.

• One way that the effectiveness of the financial management

process can be measured is by using a technique called

benchmarking.

• Benchmarking can also be undertaken by comparing performance

with that of other like businesses, although it can sometimes be

difficult to gather the information on external competitors.Benchmarking is where an organisation will compare similar internal

operations, identify the department with the best performance standard and then subsequently apply that standard to other inefficient departments.

NON-FINANCIAL OBJECTIVES REPORT

Apart from financial reporting, there are other aspects of a

company’s performance that should be reported. These are called the

non financial objectives and would include the following:

Lost time due to injuries report

Employee turnover and absence

Environmental aspects Compliance with legislative “overheads”

NON-FINANCIAL OBJECTIVES REPORT

• These objectives are important considerations in the performance

reporting for companies

• Non-financial objectives often cannot be directly measured

• Therefore, the targets that are set for indirect items should reflect

the situation. For example, if a business receives complaints from

10% of the customers that receive a particular service, the

business should focus on altering how the service is provided.

• In addition, complaints should be categorised in order to split

those that are minor, easily altered issues and those more serious.

STRATEGIES AND PLANS ARE REVIEWED AND UPDATED

• The accuracy of data collection and collation has been

demonstrated and any shortcomings in this area will negatively

impact the performance reports and lead to an inaccurate budget.

• A lot of the information you need to prepare your budget and

plans is unfortunately speculative and future-based, so any and all

information that can lead to more accurate predictions will lead to

a better budget.

• Reviewing the performance reports for variances should indicate

whether the assumptions and estimations used the previous year

were wrong or based on poor data. Now is the chance to correct

these past errors and optimise performance for next year.


• Variance analysis will only show the variances but also must be

backed up with expert analysis of why they occurred in the first

place.

• Unfortunately, while budgets present a plan for the coming year

they remain fairly dependant on assumption, past and old data,

hopeful estimations, best guesses and the like.

• The use of contingency plans to combat negative, potentially

nasty risks from having a major impact on the business is still a

retroactive step. Retroactive steps are taken in response to or

after the event. Proactive is taken before it happens i.e. the state

of being prepared.


• Do not be afraid of changing the expected outcomes of the

budget. That is why analysis and reporting is done. Budgets are

based on past performance and future expectations and the

accuracy can only be checked by the results.

• The best you can do is to keep accurate records, enter accurate

data, constantly review, be realistic with estimations of variable

costs and sales revenue and try to learn from the mistakes of the

past.


Strategies for optimisation

• There are many suggested strategies for optimising performance

and they can vary according to achievability and can include:

− Decreasing expenses by 10% by end of 20XX

− Reducing staff turnover by 20% by 20XX

− Introducing a new product(s) into the market by May 20XX

− Improve unit sales by 500 units per year on a particular

product by 20XX

The strategy you select may be a combination of various actions and

should be implemented as per company procedures and practices via

the use of a well-constructed implementation plan.

PERFORMANCE REPORTS

• Once financial management processes have been established, it is

important to review them and understand that modifications often

need to be made. Additional information or reports may be

necessary for operations to become more efficient.

• Performance reports - actual performances of an organisation

are reported and used by management to:

− Monitor performance in relation to the budgets

− Make decisions

− Plan for the future

• A high quality performance report provides detailed, concise and

complete information in order to help management in their

decision making.

PERFORMANCE REPORTS

• The report should be:

Reports can be:

• Periodic - written at predetermined times and reflects the

performance of the organisation for a set period

• Progressive - prepared and the timetable for completion of future

work provided

• Specific - produced on request for a specific purpose

Complete Accurate

Authentic Understandable

Timely

PERFORMANCE REPORTS

• An internal performance report is a management tool used for

planning and controlling. This is prepared at set intervals

determined by management. The timing of these reports is

important if they are to serve the purpose they were written for.

• The recipients of reports are the members of staff who hold

positions of responsibility and who will be expected to take any

remedial action required

• Organisational plans are not limited to items where dollars and

cents are involved; qualitative factors also play an important role

in the planning process of an organisation.

• It can be difficult to measure qualitative factors as these factors

include such things as quality standards, customer service, and

market share.

PERFORMANCE REPORTS

Report deficiencies can include:

Content

• DO NOT do these in your reporting:

− Omit relevant and important information

− Include irrelevant or unnecessary information

− The format is wrong

− Misleading report titles and inappropriate subheadings

− Duplicated information

PERFORMANCE REPORTSTiming and Distribution

• The reports may need modifying if the content is not valuable at the

time the report was generated; or if valuable information was omitted

from the report.

• Additional information requirements can arise from a change in work

practices, a change in the day-to-day operations, and a change in the

use of technology or indeed from a change in the market the

organisation operates in. The needs of the users of the reports may also

change over time if the environment in which they operate changes. It

could be that the only modification required is the format of the report

in order to standardise the reports across the organisation.

• Timing of reports is critical, as they need to provide the required

information in time to ensure that any remedial action taken can be put

into place before anything changes

PERFORMANCE REPORTS

Timing and Distribution

• The distribution of reports is also an important part of the process;

it is futile to distribute accurate and timely reports to the members

of staff who do not use the information to make changes

• Accurate information and regular performance reports is an

important management tool to ensure the efficient and effective

running of the organisation.

• Any improvements that are recommended need to be

implemented in line with the financial objectives of the

organisation. They also need to be monitored and reviewed for

their success or failure.

IMPLEMENT AND MONITOR AGREED IMPROVEMENTS

• You have gathered all the data and information from your business

operations and decisions need to be made in relation to the

direction and actions to be taken.

Example:

If your business team determines that sales need to increase to improve the inflow of cash for the business, strategies need to be developed to make sure that could happen. It might be that there needs to be a greater investment in advertising or promotion. Maybe it is more cost effective to use social media to promote the company and its products, there may need to be an investment in human resources, is the right person already on staff?


• Once the direction has been defined and confirmed, who needs to

be involved? When will the new processes or measurements need

to be implemented by? Does everyone involved know what is

expected?

• Any improvements recommended need to be implemented in line

with financial objectives of the organisation and monitored and

reviewed for their success or failure.

• An internal audit forms part of the internal control process, and is

undertaken to check the processes and record keeping

highlighting any areas of concern.


There are several reasons to conduct internal audits:

• Confirm procedures are in place to run a business to maximise

profit

• Quality and effectiveness of the accounting system

• Administrative internal controls

• Verify compliance with all applicable regulatory agencies –

including compliance by staff not just processes are there checks

in place?

• Protect all business stakeholders from risk of fraud


• All businesses, public or private need audits to protect financial

security on a regular basis.

• It is recommended that internal and external audits are conducted

by impartial groups qualified to assess the health of the business,

twice a year is advised.

• Each organisation is different however, do your own research as to

the most appropriate time frame for auditing.

• When will your business monitor progress? Who needs to be

involved?

• It is not enough to decide on a new approach, measurements and

responsibilities must be clearly defined and communicated to all

stakeholders.


• New budgets or initiatives need to follow the same procedure we

started the process with.

PLAN• Identify budgets that need to be implemented

by the organisation• Set targets and goals

DEVELOP• Which people in the organisation need to be

involved developing budgets

IMPLEMENT • Communicate the budget to relevant

stakeholders

MONITOR • Look at budget vs. actual results• Draw on contingency plans if needed to correct

variances

EVALUATE/ CONTROL• Report on outcomes to use for future

improvements• Continual improvement and evaluation

TLIP5035A Presentation 12

Education

Transcript of TLIP5035A Presentation 12