Finance consulting
From Wikipractice
Contents |
Introduction
By its nature, the finance enters all the domains of a company: it is a means to get resources for the operations of the company and it is also a measure of the performance and the results of a company.
With the aim of examining the nature of the consultation in financial management, we established five possible sectors of consultation:
- Development of the company.
- Economic study.
- Profit improvement programs.
- Financial assistance to ailing firms.
- Management of the financial resources.
Development of the company
The development of a company can concern the construction of a new factory, the addition of a new product, the change of a process of production, the installation of a new equipment, the entrance into a new market, the choice of a new store, etc.
In each of these domains, the consultant in management measures the required resources and the incomes and the costs which will ensue. The purpose of a project of consultation is to estimate if the foreseen profits justify the resources which the director of the company wishes to use in his project of expansion.
If a director of company plans to take some expansion by the acquisition or the merger of companies, he can engage a consultant to estimate the financial consequences of his project.
The mergers are used to unite companies which have public interests. The motivation can be of fiscal order or administrative order.
Acquisitions are made for one of following both reasons:
- To accelerate the expansion by obtaining at once an entrance to a new domain, produced or walked(worked)
- To obtain new installations.
The last point can be necessary for a company with the aim of increasing its production capacities or to modernize those already existing.
Economic studies
In every case where a director of company has to choose between two or several manners to execute an activity, a consultant in management can be used to estimate what would be the most favorable activity.
This very vast domain can include the decisions such as: buy or rent a new equipment, buy or produce certain equipment, develop a new product or buy a license, etc.
Essentially, the method of the consultant is similar in all the examples: for each of the alternatives, he estimates the amount of the resources to invest, the incomes which will be produced and the costs which will ensue from it.
He compares each of the alternatives to identify the one who will produce the biggest return on investment over a certain period of time.
Profit improvement programs
A profits improvement program aims at bringing substantial reductions of the costs in all the domains of the company. In such a program, all the elements of costs must be analyzed, estimated and reduced.
A profits improvement program can represent a traumatizing experience for a company if it is realized without taking into account employees.
When a consultant is required for this kind of work, he has to act firmly but by taking care of protecting the morale of the employees.
Furthermore, it is important that the changes occur without damaging the image of the company.
Financial assistance to ailing firms
All the efforts must be simultaneously arranged with the aim of improving all the operations of the company, to have immediate and substantial results.
This kind of study is begun when a company works at a not acceptable level of return. Generally, these companies are in a position of loss and require drastic corrective actions to remain reliable.
Every study is different. However, certain stages should be followed with the aim of obtaining the maximum of results:
- To eliminate the services, the factories and the profitless products.
- To reduce in a radical way the controllable overheads.
- To modify the composition of products with the aim of emphasizing the most profitable articles.
- To employ only professionals of high quality on the key positions.
- To take only the orders which which can answered.
- To deliver products in time, inside estimated costs and in agreement with the quality standards and the specifications.
- To improve the purchases of the material and parts.
- To improve the methods of work in the factory and in the office.
- To maintain the overtime at least.
- To establish realistic objectives and systems for motivating the staff.
- To install an effective costs control system.
- To measure the performance of the staff objectively.
Management of the financial resources
In the management of the financial resources, there are two important elements to consider: the first one relates to the sources of funds and the second in the usage of funds.
Sources of funds
In the analysis of the sources of funds, the consultant examines the structure of the capital of the customer and suggests a just balance between the share of the shareholders and the creditors.
He also considers the conditions of the market of the money, the candidates in the obtention of the venture capital or the loans, and the costs of short term financing or in the long run.
The policy of dividends of the company is also revised to insure a reinvestment of the profits.
Use of funds
In the analysis of the capital uses , the recommendation of the consultant aims at a just balance of the fixed and current assets of the company.
In this domain, he can highlight the relations which exist between the costs, the volume and the profits of the company.
