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Financial Planning as One of The Key Finance Roles (Part 1)

slang — Tue, 13 Oct 2009 03:28:19 +0000

In my articles on transformation of finance role and the recent article on finance personnel embarking another role of gathering and analyzing the financial competitive analysis, I again now touch on another critical mass of finance role which is financial planning.

Gone are the days, when keeping the books of account accurately and the timely submission of the financial report to your boss completes your whole cycle of your financial role.

What really is financial planning? What is the contrast with accounting?

To say simply and

If I may say so, when you are involve in the accounting aspect, you are only a “historian”, you take care of the aftermath of events in the business which culminate into the financial figures you are churning out.

Whereas, financial planning is an area where you are “crystal gazing” or forecasting before the financial result is out. Of course, you need to ensure that the actual compared to forecast should be much closed. Normally, the variance should be plus minus 3-5%.

Hence, financial planning (crystal gazing) is the forward planner whereas the accountant (historian) will pick up all the actual financial transaction and translated into financial accounting reports.

In a multinational organization, this role is segregated with the presence of a financial planner and an accountant to take on different role.

However, for most of the organization, the accountant is the one doing both. Hence, because of this so called crammed up of work and manpower limitation, financial planning role has never been able to be fully appreciated by the financial accountant.

Salient Points Or Key Notes on Writing A Will

slang — Wed, 05 Aug 2009 12:20:28 +0000

Some of us prefer to write our own wills instead of forwarding to the professional will writers.

If you are one of those who prefers to write his or her will, then the expert advice on salient points writing a will needs to be noted:

Understand that, you need to be 18 years old and above( west coast of Malaysia or Sarawak) or at least 21 years old (living in Sabah) of age to write a valid will
Without saying, you need to be of sound mind when writing the will ie you need to know what you are doing and must not be influenced when writing a will
You must be ready with a listing of what you have(Roll Royce, bungalow, diamond,etc) and don’t forget your listing of borrowing to banks, friends,relatives
Also have ready your list of beneficiaries where you detailed who should receive what. Ensure that all eventualities are dealt with and that all beneficiaries and the nature of the gift to them is clearly identified
Name an executor and an alternative executor
Check the names of all relevant persons correctly whether its the executors and beneficiaries
Have the will documented on a clean sheet of paper. Any handwritten will needs to be legible and clear to avoid future problems ( PS: a will can be either hand written or typed and can be in any common language. Unless it is a privileged Will made by airm forces during warfare, it cannot be recorded vidoe or audio in nature)
Insert a revocation clause re: state specifically that all previous wills are revoked
Insert a residual clause re: any remaining parts of the estate not left to any person can be distributed under the Intestacy Law
Consider things like legacies when you should specifically state to bequeath to specific person re: ” I give to my son(name) my Club membership(name)… to my daughter(name) my car(specify if you have more than one)
Be sure to date your will
Sign or thumbprint your will at the foot or end of the will in the presence of at least two witnesses who must then both sign their names, and write their addresses and occupations/positions at the same time.( The testator need not sign the will in front of the Commissioner of Oath). Note that your witnesses need not know the content of the will. They are merely witnessing that the testator is of sound mind and voluntarily signing the will (not by force or under duress). Neither the witness nor the spouse of the witness should benefit from the said will.

[ see article on what's a will and benefits of having a will and a will is revoked ]

How Or When Can A Will Be Revoked?

slang — Tue, 04 Aug 2009 12:14:23 +0000

Earlier article discussed what’s a will and the benefits of having such. In this article, we understand when a will can be revoked:-

The testator who wrote it converts into a Muslim( A Muslim can will away only one third of his or her estate)
Writing a new will would revoke the old will
A will is considered to be revoked when it is destroyed
When the testator marries, then the will is automatically revoked. The will remains valud if he or she had stated the name of his or her future spouse in the will.

Salient Points Or Key Notes on Writing A Will

Creation Of A Will As Part Of Wise Financial Planning

slang — Sun, 02 Aug 2009 14:23:02 +0000

As part of wise personal financial planning, the drawing of a will is essential.

So, what’s really is a will. A will basically is not a contract and it does not need to be stamp to legalize it. A valid will may be effective as long as it abides to the Will Act. A will is basically defined as a declaration of a person’s intention on matter which he/she wishes to take effect, after his/her death.

When a person draws a will, it signifies an act of maturity and responsibility in planning for the future well-being of your love one(s). You draw a will and yet you are still in control of your assets.

Some benefits of drawing or creating a will are:-

Your hard earned assets are given to those who you really want to give to;
It prevents unnecessary litigation or legal hassles between different parties which cause money, time and heart-aches;
It gives you the choice to decide who should be your beneficiaries;
It allows you to appoint your own executor or trustee to execute your will;
It enable a shorter time to obtain a Probate(for death with a will) than a Letter Of Administration(for death without a will) which costs less in term of legal fees and time consumption.
With a will, it gets rid of the need for guarantors when applying for a Probate. Without a will, the Court needs two guarantors who own the same amount of estate as the deceased. The beneficiaries may face difficulty when getting such guarantors.

Personal Tax Planning:Benefit-In-Kind & Perquisites

slang — Fri, 05 Dec 2008 10:40:36 +0000

As usual, before we do our personal income tax planning, we need at least to understand the latest tax law legislations on employees tax exempt benefit-in-kind and perquisites.

Append below in this article are the latest/up to-date benefits-in-kinds and perquisites (cash related) which are exempted from personal tax which the employee can plan to mitigate his/her personal income tax liability:

	Benefit-in-kind, tax exempt (YA 2008 onwards):	Ringgit per Annum
1	Petrol/traveling allowance between house and work place (wef YA 2008 to 2010)	2,400
2	Petrol/traveling allowance and toll card for official duties	6,000
3	Child care allowances	2,400
4	Company free products/discount	<1,000
5	Interest subsidy for existing/new house, passenger motor vehicles/education loans up to Rm300k
5	Parking allowances/fees
6	Meal allowances
7	Phone, mobile phone, phone bill, PDA, internet charges, broadband subscription ( even in employee’s name)
8	Gift of computer
8	Non transferable company free/discounted services
9	Medical, dental treatment and child care facility
10	Medical benefits extended to maternity/traditional treatments

Note that the above tax exempt benefit-in-kind and perquisites are not extended to director of a controlled company, sole proprietor and partnership.

Initiatives To Drive Faster Close

slang — Sun, 21 Jan 2007 15:36:30 +0000

In the earlier article, we understand some of the reasons/justifications and challenges for a faster close.

So what can be some of the initiatives to drive a “faster close”:-

Increased
Reduced
Discipline-strict
Reporting
The alignment
Close the
Reduced
Materiality
Automated
Weekly
Automatic
The use
Full online
Corporate
Submissions
A third
Have clear-cut

the work flow/process ( refer earlier article) automation – for example, online daily posting of sub ledgers integrated with sales and costing reports errors-accounts code validation to be done at source hence removing extensive error correction at the month end cut-off procedures enforced with all your related companies ( subsidiaries, associates,etc) – the consolidation of results, production of monthly management accounts, production of management information using integrated software with the elimination of spreadsheets manual intervention the group’s chart of accounts amongst all related companies – adopting a single chart of accounts accounts prior to the month end allocations guide for adjustments accruals rather than monthly reporting cycles interfaces between financial and operational systems of portals review and real time reporting adjustments are discussed and processed one week before cut-off are in based currency eg USD which provides a consistent view of the results party inter-company billing process leverages EDI systems for invoices, payments and receipts. This will then ensure minimal time spent at month-end on inter-company account analysis policies on how to resolves disputes amongst inter companies style="margin-left: 0.25in; text-align: center"> 0.25in">It’s important to establish high visible performance indicators for measuring both quantitative and qualitative terms the progress the company is making of its fast close objectives. There needs to have an evaluation of performance and variances from plan on a on-going basis. Special attention to the change process re: faster close by appointing “champion”/project sponsor who should take a very active role in ensuring the success. Don’t forget that there is also the need to gain the buy-in of key personnel involved in the closing process. If there are any organizational changes, this need to be communicated to the staff who are affected as soon as possible to eliminate uncertainty.

Financial Forecast – How Long & How Detailed

slang — Sat, 20 Jan 2007 16:05:23 +0000

The earlier article dealt with some of the reasons for preparing the financial forecast.

As for the length and depth/details of the financial forecast, it varies as tabulated below:

	Purpose/Requirements	How detailed?
1	To obtain banking facilities	12 months + 2 years
2	To restructure outstanding debts with banks	12 months + 3 to 6 years
3	To prepare for IPO	3 to 5 years
4	To assess the value of a company	2 to 3 years
5	To estimate tax payable	12 months to 2 years
6	To monitor cash flow of the company	12 months

Purpose of Financial Forecasting

slang — Sat, 20 Jan 2007 15:29:07 +0000

Do we know why we need to prepare financial forecast?

Well, there are a few simple reasons:

To obtain Banking facilities by preparing projected financial statements like the Income Statement, Balance Sheet and Cash Flow Forecast.

With the forecasts, both the banker and company is able to determine whether sufficient profits is generated to pay financial interest and also how much and when to repay the banking facilities borrowed.

To restructure Outstanding debts with banks

By preparing the financial forecast, we can see whether the business can generate enough cash to repay the restructured financial commitments. Obviously, if bankers see that even after the proposed financial restructuring, the company is still not able to pay the financial commitments then they might prefer to go for liquidation or receivership.

To prepare for IPO ( initial public listing)

The preparation of detailed financial forecasts profit, balance sheet and cash flow forecasts) and submission to Securities Commission is a must for listing purpose.

To assess the Value of a company

Basing on the earning basis, the quality of the profit forecast is extremely important. The fair market value of such a company relies very much on the profit forecast and its expected P/E ratio vis-à-vis the industry standard.

To estimate Tax Payable

This is particularly important if the Inland Revenue of a country is based on current year assessment and self assessment. The company therefore need to properly forecast its profit and estimate tax liabilities and start paying the relevant tax installments.

To monitor Cash Flow of the Company

As cash is the “blood’ of the business, it’s vital for well-managed companies to seriously prepare cash flow forecasts on a monthly basis to avert/manage any cash flow deficit/crisis

Financial Planning as One of The Key Finance Roles (Part 3)

slang — Thu, 13 Jul 2006 03:30:32 +0000

Sometimes, we might be confused with certain terms used like:

Flash
Best-estimate
Forecast
Budget
Plan

Normally flash is when the company’s cut off is over but the accounting deadline for submission is still a bit far away like about 7 to 10 days.

Local management or your overseas bosses want to see a “ flash” – an image of what might be the actual results.
As the company’s cut off for sales is over, the flash should be almost the same as the actual results whether in terms of sales, expenses or profit/(loss).

A best estimate or BE figure is what we to our best of our knowledge whether past trend/data or using our inner and external knowledge to guess what should be the financial figure be. To coined simply, “ to the best of your ability, get me the figures”

Similarly, a forecast is a set of best estimate which is done after a budget has been completed. Due to time lapse after the completion of the budget, scenario might change which render the necessity of re-looking again hence the after match of re-looking is the forecast.

A budget or a plan is the same.

Financial Planning as One of The Key Finance Roles (Part 2)

slang — Thu, 13 Jul 2006 03:29:35 +0000

It is easier said then done by wanting to institute financial discipline into the organization.

To implement accurate and timely financial planning, it is quite difficult for the following reasons:

We need to get data from other operating management of different business unit. We are now crossing outside our own finance border into the operation and the marketing side of the business;

We need to convince all your fellow operating managers to put up these figures uniformly and consistently by explaining all the goods reasons for doing so;

At times, if the company is newly set up, we might need to set up the procedure and the correct model to forecast for example setting up the correct sales filtration process/sales cycle to collect sales figures and how to forecast expenditure ahead of the actual occurrence and many others

In most matured multinational organization, the sales filtration process/sales cycle model would have been quite systematic and in order.

For the benefit of the readers, I include in this article, an approach to the sales filtration process in a newly set up Information Technology organization.

Assuming that in this IT organization, we have a few sales business units.

Before sales can come in, we need to gauge the success or probability of closing this potential sale opportunity by:

(1) first identifying the customers
(2) the products likely to be sold
(3) the probability of winning it

The following Sales Opportunity Schedule needs to be set up:
Sales Business Unit: No 1
(1) Salesman A
(2) Potential customer name
(3) Products
(4) Total Contract Value
(5) Win Probability
(6) Estimated Sales (5) x (4)
(7) Reason Win/Lost
(8) Estimated Close Date

Looks simple, what we need now to do is to either put up an excel spreadsheet or automate this process by cumulating all the salesman results in all the various business unit and we can then get the estimated sales for the various months in the year.

However, please watch out for the following salient points:

(1) we need to consistently and periodically “interview” or interact with the heads of the business unit to verify the truthfulness of this sales opportunity schedule. This particular role is crucial failing which sales forecasted would never be accurate;

(2) we need to ascertain what is the “Win Probability which can be as follows:

10%-Opportunity identified but not yet qualified;
20%-Opportunity qualified; not ready to commit resources;
40%-Resources committed to qualified project;
60%-Order expected to be closed within 90 days;
80%-Order not closed; customer signature date known
90%-Order won: awaiting official order documentation
100%-Order signed and submitted to Finance

It is very important that these percentages be used appropriately so that we are able to determine where an opportunity is with respect to the sales cycle.
(3) Reason Win/Lost should not be belittled. “From failure, come success” hence all data whether for win/lost should be recorded. It is important to select the best possible reasons. This information will be used to analyse the effectiveness of sales programs and to potentially drive program revisions.

Valid reasons should include:

price;
performance;
price & performance;
quality;
education;
make/image;
terms;
don’t know;
features/functions;
availability;
capacity;
support;
delivery;
relations