Tools for Improving Competitiveness Mara De Los ngeles

Tools for Improving Competitiveness María De Los Ángeles Rivera, CPA – Partner, Kevane Grant Thornton Red de Mujeres Empresarias CCPR January 19, 2012 San Juan, PR

Disclaimer DISCLAIMER: This presentation and its content do not constitute advice. Attendants should not act solely on the basis of the material contained in this publication. It is intended for information purposes only and should not be regarded as specific advice. In addition, advice from proper consultant should be obtained prior to taking action on any issue dealt with in this presentation. © Grant Thornton International 2

Objectives • an overview of the different tools derived from the financial information related to the decision-making process for current and future businesses • relationship between the financial information (reporting, financial plans) and efficient business management • highlights of world class business management tools © Grant Thornton International 3

Effective business owners all know one thing. . . • no matter how great your product, your service or marketing… – if you don’t manage your money and run out of cash… it will all have been in vain • you need to understand the fundamentals of financial management © Grant Thornton International 4

Effective business owners all know one thing. . . • main goal – to make money • why do entrepreneurs fail? – they run out of money © Grant Thornton International 5

Categories of understanding of the entrepreneur or manager • level one – entrepreneur or manager knows very little or nothing about how to track the financial health of their business and use the management accounts to make wise strategic decisions © Grant Thornton International 6

Categories of understanding of the entrepreneur or manager • level two – entrepreneur or manager understands enough to be able to get someone to set up a decent financial system, to read a basic financial report and to ask intelligent questions about what he or she sees in a set of management accounts – will usually rely on someone else to deal with the dayto-day financial details but will be party to the important financial decisions and able to identify problem areas © Grant Thornton International 7

Categories of understanding of the entrepreneur or manager • level three – background in finance and will get involved in the financial details of the business, understanding the details of every transaction and how it affects the business – although this is useful, it is not essential – because you need to identify other areas and not get loose in the financial details – you should be able to operate at level two © Grant Thornton International 8

The formula QP +QE = SP Quality in Planning + Quality in Execution = Successful (Profitable) Project © Grant Thornton International 9

Methodology - Financial Information Dashboard – Key Performance Indicators Day to day (source and use) • past (historical) – • Support + Execution = financial statements Veracity – Reliability present – – – • Project comparative information decision making document cash flow future – © Grant Thornton International projected financial information 10

Reporting techniques • Reporting • Forecast • Present © Grant Thornton International 11

Key performance indicators General indicators Industry specific (up to date and comparative to prior period and budget) (depending on type of business, i. e. ) • sales • inventory • collections • overhead • cash balance OWNER DRIVEN • used/unused resources (capacity) • expenses • © Grantbottom line (net profit) Thornton International 12

Key performance indicators • extraordinary events (internal or external) – – opportunities – awareness – risk © Grant Thornton International 13

How to put capital to work and succeed S + A + E = $$ Solid foundation + Assertive Game Plan + Efficient Implementation = Succe$$ © Grant Thornton International 14

“Money is the lifeblood of business” Cash is the lifeblood of business © Grant Thornton International 15

Cash cycle analysis to unlock cash within your business – to have more cash to grow in the business you need to try to: » try to reduce the number of days in accounts receivable » try to reduce the number of days in inventory » try to increase the number of days in accounts payable – within a range that is reasonable and sensible © Grant Thornton International 16

Decision making methodology (how to use) © Grant Thornton International 17

Premises Entrepreneur Enterprise • where am I? • where are we? • what do I want? • what do we want? • where am I going? • where are we going? • how will I get there? • how will we get there? • my present relation with my • present company scheme: company: is it working efficiently, are we we developing our outmost potential? 18 © Grant Thornton International

3600 vision of the business • local and global vision • own vision • my team's vision © Grant Thornton International 19

Three elements of a business • infrastructure • decision making structure • people © Grant Thornton International 20

Business virtuous cycle 3. Institutionalization 2. Growth 1. Efficiency 4. Permanency 5. Innovation © Grant Thornton International 21

Questions… © Grant Thornton International 22