You understand the key factors affecting your financial performance
 
The financial performance of a company is influenced by many factors: but it is the responsibility of senior managers to assess the risks and take appropriate actions to ensure your company’s financial position is secure and that you have the necessary cash available to trade with your customers and suppliers
Key Issues
·         The aim of most companies is to create a sustainable business with profitable growth both now and in the future
·         Events can change the financial position of a company very quickly and if companies and consumers cannot access money then markets can collapse
·         A credit crunch, where banks significantly reduce the amount of money they lend, has a massive impact on businesses and their ability to trade
·         A sustainable and profitable business may be achieved by, for example:
o    Introducing new desirable products customers want to buy
o    Tailoring products to satisfy different market segments
o    Expanding into new markets in different countries
o    Releasing affordable products that are designed for manufacture, easy to assemble, environmentally friendly and recyclable
o    Reducing manufacturing costs:
§   Introduce process capable, adaptable manufacturing modules/cells
§   Adopt flexible working arrangements e.g. annualised hours
§   Invest in new manufacturing processes and technology
§   Outsource non-core components to reduce complexity
§   Work in partnership with suppliers to improve effectiveness
o    Continually train people to be multi-skilled and more effective in their jobs
o    Remove unnecessary overheads and expenses from the business
o    Increase the flow of materials through the process to release cash
o    Reduce the cost of quality, scrap, rectification and quality assurance
o    Save on energy costs: better insulation, turning power off when not required, using energy efficient lighting, appliances and equipment
o    Being proactive in anticipating competitors’ plans
o    Taking risks out of financial transactions, exchange rates, cost of money
o    Confirming that customers can penetrate and/or grow markets, as predicted
o    Managing the end of life for existing products
o    Exploiting new technologies
Factors for Success      
Factors to  Avoid
1.     Your managers constantly monitor the financial performance and take action when necessary
2.     Your management accounts are published without delay at the end of the reporting period
3.     You regularly undertake risk assessments and know the actions needed to remain profitable
1.     Being unaware of external changes that will have an impact on your business
2.     Taking decisions based on poor information
3.     Reacting to events without due thought
4.     Your accountants making decisions without understanding their business impact
Who does this apply to?
Senior management teams
Realisable Benefits
A well-managed business able to generate acceptable profit margins and cash

Guides:

Factors affecting financial performanceFactors affecting financial performance

Factors affecting financial performance

Cash flowCash flow

Cash flow

Determining the cost of productionDetermining the cost of production

Determining the cost of production

Justifying the make versus buy decisionJustifying the make versus buy decision

Justifying the make versus buy decision

Justifying capital expenditure decisionsJustifying capital expenditure decisions

Justifying capital expenditure decisions

Managing debtorsManaging debtors

Managing debtors

Managing creditorsManaging creditors

Managing creditors

BudgetingBudgeting

Budgeting

Providing management informationProviding management information

Providing management information