What The Numbers Mean
What The Numbers Mean
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What The Numbers Mean

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Last updated on 2019-03-02

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

Renier Botha
Renier Botha

Renier Botha is a Business Leader and Chartered Technology Professional (CITP) that works with organisations to better integrate technology innovation with business ideas, products and service delivery.

Advising business leaders, Renier focusses companies, from start-up to enterprise, to better integrate technology innovations and intellectual property into their mainstream revenue channels. As part of this transformation process, he ensures knowledge workers are more commercially aware.

In the recent years, Renier has been responsible and accountable for leading various origanisations and for directing and delivering multiple global programmes with mixed teams in multi-geographical locations. Renier started his own consultancy business in June 2013 - renierbotha.com

Today Renier serves as Executive, Non-Executive Director. Board Advisor and Management/Technology Consultant. 

He specialises in increasing the technology value proposition and show people how to achieve objectives that, at first, might seem impossible. Working with him ensures that an organisation fully understands and capatilises on all it’s technology assets, reducing the total cost and increasing the return on investment of technology by developing innovative and capable technology service delivery assets.

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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