Future Research Leaders Program

Module 5Financial, Resource and Risk

Management

Objectives for this Workshop

To enable you to:• Reinforce your understanding of the

basic principles of financial management in particular in relation to costing,

• Relate the online generic materials to your home university practices, and

• Share experiences and best practice with colleagues.

Introductions – One minute please!

• Name and Role • Existing financial skills• Something about you which we could

not tell by just looking at you• Next

Setting the Scene

• Sharing experience• Agenda• Housekeeping – phones etc.• Flexibility, feedback and formality

Please ask questions at any time – there is no such thing as a stupid question

Topic 1Understanding financial information and reports

• Understanding personal finances• Understanding business finances• Key financial statements• Analysing financial statements

Understanding financial information and reports

The Typical Family’s Finances

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The Key Financial Statements

Profit and Loss Account / Income Statement

Answers the question – “How did we do?”

Summarises the revenue and expenses of anorganisation for a period, and shows theoverall profit and loss (Operating Result).

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Profit and Loss Account/Income Statement

Revenue – Expenses =

Net Profit/(Loss)(Operating Result)

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The Key Financial Statements

Balance Sheet

Answers the question “Where do we stand?”

Summarises the sources of funds provided to aorganisation by shareholders and others as at aparticular date, and how those funds have beenused to invest in fixed/non current assets andworking capital.

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Balance Sheet

Assets – Liabilities = Equity

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Balance Sheet Terminology

Current assetsNon Current AssetsCurrent LiabilitiesNon Current LiabilitiesEquityDepreciation

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The Key Financial Statements

Cash Flow Statement

Answers the question - “What happened to

the cash?”

Shows the funds received by a businessduring an accounting period, and the waysin which those funds have been used.

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Cash Flow StatementCash from/for:• Operating activities• Investing activities• Financing activities

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Cash Accounting versus Accrual

Accounting

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Cash Accounting versus Accrual Accounting

Cash Accounting• Receipts• Payments

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Accrual Accounting• Revenues and Expenses – matched• Assets• Liabilities

What are the items in your projects whichwould show the most significant difference ifthey were accounted for on a cash basis ratherthan an accruals basis?

Topic 2 Costing

Using the Project Case Study example, list all

the costs which you would need to include

when costing your Grant Application.

( No numbers needed – just the cost description)

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Understanding Cost Behaviour

• A change in the level or ‘volume’ of an activity is likely to result in a change in the cost of that activity

• Different cost elements will respond in different ways.

• The key concepts are– Fixed cost– Variable cost, and– Total cost

Melbourne University Costing Approach

Not all costs are allocated to the project.

So to understand the true cost of the project, identify:

• Direct Costs of the Project, and• Be aware of all the Indirect CostsWhich are the costs for which are you likely to receive

funding?

Group Discussion Questions

Given that we have not been granted the full

amount requested

• What costs could be reduced or eliminated ?

• What extra funding could be resourced?

Topic 3 Preparing and Managing Budgets

Purposes of a Budget

• Sets a Direction

• Allows Planning and Coordination

• Allocates Resources – often scarce

• Allows Review, Monitoring and Control

• Can Identify Problem Areas early

• Assigns Responsibility and Accountability

What can go Wrong?

• Budget Figures Over/Understated• Lack of Communication• No Ownership• Conflicting budgets• Additional costs due to inaccurate forecasting• Lack of proper monitoring• Lack of corrective action

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• Timely

• Compare Actual to Budget

• Identify Variances - Give Reasons

• Action to be taken – By whom/when

Timing and Nature of Reports

Topic 4 Risk Assessment and

Management

Risk assessment and management

Risk Assessment

Internal Control

Internal control is concerned with the protection of

university assets and revenue, the accuraterecording of transactions and the

classification andcontrol of expenses

Types of Internal Control• Organisation• Segregation of Duties• Physical• Authorisation and Approval• Arithmetical and accuracy• Personnel• Supervision• Management

What internal controls are appropriate to your projects and how might these work in practice?

Topic 5 Financial Reporting for

Audit Purposes

Actual versus Budget

Review the actual expenditure to date and

answer the following:

• Do you understand each line?

• Is the expenditure allowed for in the grant?

• Which items would you want analysed further?

• Which variances are due to volume, price or

timing variances?

Acquittals

What can go wrong at this stage?

Summary and

Conclusion

Strong Financial management is vital for every project.– Start with clear objectives– Set the key measures– Plan towards, and assess performance

against, those key measures

Understanding the language of finance, and having

the skills to perform basic financial analysis, arecritical steps towards a successful project.

Summary