- Project plans
- Project activities
- Legislation and standards
- Industry context
Last edited 17 May 2016
Financial management glossary
- Working capital is the everyday working money available to run the business.
- Current assets - current liabilities = working capital.
- The amount of working capital required can be reduced by accelerating the rate at which money circulates through the business (for example prompt billing).
 Working capital turnover rate
- Annual statement of income and expenditure that shows if a company has made an overall gain on trading performance.
- A picture of the business as it stands, providing a statement of total assets and liabilities at a given point in time (usually the year end).
Actual vs budget information based on:
- Net Income (after paying others) (work in progress not included).
- Gives an indication which area might be responsible for a loss or profit.
- Useful over a longer period of time to spot trends and blips.
 Key performance indicators (KPI's)
- Analyses ability to pay bills as they become due.
- Current ratio = current assets (including work in progress) / current liabilities.
- Quick ratio (acid test) - quick assets (cash+bank balance+debts) / current liabilities'
- Ratios over 1 are deemed satisfactory. The higher the better.
Financial Performance plan:
- Shows hours of each grade of person required monthly.
- Hours translated into cost x by rate per hour of each grade.
- Projected fees vs projected cost - plotted on graph.
- Compare projected with actual to monitor performance.
- Share information to give a sense of involvement and responsibility. This will allow them to align their actions with the best interests of the company.
Captive fee forecasting:
- Fees are agreed, fully documented, contractually binding and scheduled for current projects.
- An indicator of how busy a company is likely to be in short to medium term.
- Avoid the cliff edge - when a project is delivered fees reduce so it is important to win more work to maintain cash-flow through fees.
Future possible fee forecasting:
- All possible fees hoped to be earned. Anything but certain.
- Quantify probability of winning them with a success probability factor %.
- The aim is to attempt to predict the medium to long term.
- Establish whether the right number of people are available to deliver the work lined up in the captive fees forecast.
- Keep a rolling weekly forecast of people required vs people available.
- Plan for flexibility so there is always some resource available for general work.
- It is most efficient to use those with recent experience on similar projects to achieve good results quickly.
- Cashflow = total money in and out of a business affecting liquidity.
- The most accurate way of predicting the financial health of a company in the short - medium term.
- Gives an idea of when cash shortage problems may be approaching.
- Rolling 6 monthly.
- If seeking a loan / overdraft, a 2/3 year forecast may be needed.
- Good organisation is the key to good credit control.
- Invoice for fees in a regular and determined way.
- Chase up when they are not paid on time.
- Agree payment terms.
- Keep a record of all correspondence regarding fees.
- Logged in aged debtor report - all outstanding payments and for how long.
- Understand clients payment systems.
- Outstanding invoices should be chased
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