What The Numbers Mean
What The Numbers Mean
Financial Intelligence & Commercial Awareness ...for aspiring Technologists
About the Book
‘Techies doing ‘bean counting’, surely that is the role of the Finance Department - definitely not that of a technologist? Correct, but think again...
As more and more companies become increasingly digitally driven, the trend is that smart companies are investing more in their digital strategies and the conversion of technology innovation into revenue earning products and services. Leading businesses in this technology age, will be the technologist, the IT leaders of today is becoming the business leaders of the future.
This book provides a concise overview of the most important financial functions, statements, terms, practical application guidelines and performance measures.
- It explains the different financial statements in more detail, the data that make-up the information provided within financial accounts.
- It provides an overview of the underlying financials in business and technology operations, project management, marketing and sales.
- You will gain insight into how to identify and understand your target audience within the market you operate and how to measure up against your opposition.
- You’ll learn the value that commercial awareness and financial intelligence bring to setting strategy, increasing productivity and efficiency and how it can support you in making more effective decisions.
- You’ll learn what the numbers really mean.
About the Author
Table of Contents
Preface............................................................................................... 7
Acknowledgements.......................................................................... 11
Introduction....................................................................................... 12
Commercial Awareness................................................................... 15
Financial Statements........................................................................ 17
Financial Governance...................................................................... 17
Accounting Principles...................................................................... 18
3 Key Financial Statements............................................................. 19
Income Statement............................................................................. 20
What goes into an Income Statement and what does the
different profit lines tell us?.......................................................24
Balance Sheet................................................................................... 28
Sections of the Balance Sheet................................................ 30
Cash Flow.......................................................................................... 40
How to manage the Cash Flow................................................ 42
Financial Information Building Blocks........................................... 44
Supplier Cost.................................................................................... 45
Staff Cost........................................................................................... 46
Freelancers.............................................................................. 46
Permanent Staff....................................................................... 47
Timesheet.......................................................................................... 48
Why do we need to track time?............................................... 49
What are the arguments against the use of time capturing?... 52
Responsible implementation and use of time tracking............ 53
Typical information captured within a timesheet...................... 55
Timesheets in Business Operations........................................ 55
Rate Card........................................................................................... 58
What are Rate Cards used for?............................................... 58
What information does a rate card provide?............................ 59
How do you compile a Rate Card – A Methodology?.............. 60
Financial Performance Measurement............................................. 72
Ratios and Key Performance Indicators (KPIs)............................. 72
What is a Ratio?...................................................................... 74
What is KPIs?.......................................................................... 74
How to compile a KPI?............................................................ 75
Why use KPIs and Ratios?...................................................... 75
Leading and Lagging Indicators?............................................. 77
Useful Ratios..................................................................................... 78
Profitability Ratios/KPIs............................................................ 78
Liquidity Ratios......................................................................... 86
Debt or Leverage Ratios........................................................... 90
Operational Efficiency Ratios.................................................... 94
Project Efficiency Ratios........................................................... 96
Resource Management Ratio....................................................99
Sales Ratios.............................................................................102
Shareholder and Investor related Ratios..................................103
Commercial Market Awareness....................................................... 106
Understanding the Marketplace and Customer.............................. 106
Target market............................................................................ 107
Three types of markets..............................................................107
Define the Customer’s need for your product/service................108
Market Segmentation................................................................ 108
How do you go about segmenting your market place?............. 109
Frequently Repeat the Market Analysis.................................... 110
Understanding the Competition....................................................... 111
Gathering information about the competition............................ 111
Ask these questions to better understand your competition..... 112
Draw up a Competitors Table.................................................... 113
Net -Promoter Score (NPS)....................................................... 115
Frequently Repeat the Competitor Analysis.............................. 116
Financial Planning.............................................................................. 117
Why do we need to do Financial Planning?..................................... 117
Strategic Planning Process............................................................... 119
Actions in compiling a Strategic Plan........................................ 119
Budgeting Process............................................................................. 124
STAGE 1: Compile the Wish Lis................................................ 124
STAGE 2: Compile the Technology Strategic Plan.................... 126
STAGE 3: Compile the Technology Budget............................... 127
STAGE 4: Review and Approval................................................ 129
Forecasting during the financial year............................................... 129
Financials in Practice......................................................................... 131
Using Financial Statements to make decisions.............................. 132
Interpreting the Income Statement............................................ 132
Interpreting the Balance Sheet.................................................. 143
Interpreting the Cash Flow......................................................... 148
Financial Reconciliation............................................................. 151
Abbreviations (WIP)........................................................................... 152
Definitions (WIP)................................................................................ 155
References.......................................................................................... 159
About the Author................................................................................ 161
Bio....................................................................................................... 161
Renier’s career story in His Own Words......................................... 162
Appendixes (WIP).............................................................................. 168
COPYRIGHT........................................................................................ 170
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