I like being involved in a business or just discuss about it. Its not much about earning the dollars and cents, its the experience that comes with it. Problem solving, strategy planning and management are among the valuable skills that can be acquired. It could be said that business is more of like a hobby to me, a break to the continous strenious study time.. ughh.
Yesterday I went to a talk delivered by Puan Irnee Ismail, one of the CFO of Ainon Holdings. It was held at ABS HQ in Gombak, its a walking distance from Melati station. Lack of planning ended up me having to take a taxi from Gombak station and was charged RM10 flat, no meter. I was in a rush so I don't have much choice. The price of ignorance, inclusive of GST*. In my effort to recollect and retain what I've learned that day, I would share them with you guys. Hope its beneficial to you all !
The topic of the seminar was 'Menafsir Angka Kewangan'. Basically it discusses how we should analyse the financial health of a business based on the numbers given. It would be helpful if we have some background of basic financial terms like revenues, budget, debit, credit and others before coming. If not its difficult to follow.
The breakdown of the talk:
1. Score card
2. Type of account statement
3. Analyse the numbers
4. Convention accounts
1. Score card - its a like a key performance index. We need a way to gauge the progress of our business . Having a score card is as simple as setting a target sale or revenues. For example, Isabella sells hijabs. Her business would be more efficient if she set a target sale for a each month, like maybe 50 units per month, by then her inventory should be cleared. From that she can evaluate her performance from time to time based on whether she manage to reach the target sales and if not why. Nonetheless, it all depends on her strategy
2. Type of accounts - in the corporate world, there are countless types of account statement used to assess different financial situations. Well to me it appears countless though. For SMEs ( small medium enterprises ) to survive, they should at least have these two types proft/loss acc. and balance sheet. Not to forget cash flow, where it would show the money in money out, but not as important if you want to know your financial position
3. Analyse the numbers - based on the score cards, the type of accounts you can assess the financial health of the business. This skill is vital not only so that you can evaluate your own business but others too. Huh? Other businesses? Why you may ask?
If you want to invest in other businesses, or take-over ,then its a must. Classic, #lokalah example would be when Tony Fernandes acquired the airline company with RM1, but along with it a huge mess of debt 40million. Hence, Tony has to analyse the financial standing of the debt ridden company, under DRB-Hicom, went through the different account statements before he could potentially make it into the AirAsia that we have today
4. Convention accounts - Accounting principles that is conventional, widely accepted format I believe. An example of that is the use of historical cost in accounting. Example, Ali set up a honey manufacturing company. He needs to get a space lot to place his machineries so he bought a land priced at RM 10,000 in 2015. 5 years later the land raised in value to RM20, 000. Based on the historical cost principle, Ali would still have to value his asset of land as RM10,000 , the cost that he bought the land, not the market value. There exceptions to the rule though
End of part 1
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