Ftm Business Template - Health Check Finance
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HealthCheck Finance Business Template
What is a HealthCheck?
When should you use it?
The Finance HealthCheck template provides a structured method for assessing the current status of the Finance area of your business based on industry best practices.
Make the use of HealthChecks part of your annual review of the critical areas of your business. However, ensure that your improvement actions are planned and monitored on a more regular (quarterly) basis. Note that for some teams, the HealthCheck will also form part of an external audit or compliance process driven by customers or industry regulators.
Why is it relevant? As industries become more competitive survival is about doing more with less whilst still delivering against customer expectations at a level that exceeds the competition. To achieve this you need to: 1) understand what ‘best practice’ looks like, and 2) understand your current performance – ideally against the competition.
Who needs to be involved? The HealthCheck is completed by all those that are responsible for performance in this particular area of the business, but ensure you seek the views of all those involved – even if you do not agree with them. Stakeholders may mainly be internal to the business, but ensure that you get an external perspective involving the views of key customers and suppliers.
How should you implement it? Plan the HealthCheck carefully and ensure that you get the right people involved early in the process. Gather information through face-to-face interviews where possible, although electronic checklists can enable you to involve a larger group. Gather evidence of performance as you go. Then consolidate the various views and look for areas of inconsistency across different stakeholders, and assess areas of concern. Finally, develop a clear action plan with ownership and timings for getting to green or for improving the score on an individual item.
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
HealthCheck Finance This is a case example based on a fictitious company called TVT – all the data is displayed for demonstration purposes only. For a detailed explanation of what each cell is used for please refer to the Virtual Consultant on the following pages.
ID
Category
1
Strategic fit
A
Vision
B
Evaluation criteria Score
Status
There is a clear statement of corporate visions and strategy
2
Green
Goals
Senior and middle management have communicated the visions and strategy across the business by setting clear and attainable goals
3
Green
C
Congruence
The team are committed to the goals set for them and understand how they fit in with the overall strategy
2
Amber
2
KPI relevance
Score
Status
A
KPI cascade
There is a clear statement of the KPI’s for both the team and the individuals
4
Green
B
Briefing
The team is well briefed that if they achieve their KPI’s they will be seen to be successful
4
Green
C
Contribution
The team’s achieving their KPI’s makes a significant contribution to the organisations goals and strategy
5
Green
3
KPI commitment
Score
Status
A
Understanding
Each member of the team understands their individual KPI’s and the importance of team success
4
Amber
B
Commitment
Each member of the team is committed to achieving their individual KPI’s
3
Amber
C
Support
When a team member is not hitting a KPI they expect and receive support from managers in correcting the problem
4
Green
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
4
Basic knowledge
Score
Status
A
Cash flow
Each member of the team is aware of the crucial importance of cash flow management
4
Green
B
Income statement
Each team member understands the impact that their activities have on the income statement
4
Green
C
Balance sheet
The team members understand the difference between capital and revenue expenditure and how a balance sheet reflects this difference
5
Green
5
Budgeting
Score
Status
A
Process
The team understands the company’s budgeting process and has a positive attitude towards it
1
Red
A
Planning
The team is involved in producing the budget
2
Amber
C
Commitment
Each member of the team is committed to working with the budget
2
Amber
6
Financial research
Score
Status
A
Process
All members of the team are able to read an annual report and extract the data needed for analysis
3
Amber
B
Analysis
All members of the team can interpret the results of financial analysis of key customers, competitors and suppliers
2
Amber
C
Application
The team uses the results of financial analysis to improve their performance
3
Amber
7
Project evaluation
Score
Status
A
Comparison
The team understand that proposed projects will be analysed and compared with other proposals from elsewhere in the organisation
1
Red
B
Template
The team understands the business case template that the organisation uses for evaluating proposed projects
1
Red
C
Persuasive communication
The team are successful in presenting clear and cogent business cases
2
Red
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
8
Management accounting system
Score
Status
A
Understanding
The team understands the internal financial information system
4
Green
B
Monitoring
The team uses the internal financial information system to monitor its performance
5
Green
C
Improvement
Where the information system is weak, there is a plan in place to get the system improved
5
Green
9
Relationship with finance department
Score
Status
A
Respect
The team respects the contribution that the finance department makes to the success of the organisation
4
Green
B
Business environment
The financial controller understands the business environment that the team is working in
4
Green
C
Co-ordination
We keep the finance department up-to-date with our performance and plans through regular communication
5
Green
10
Analytic tools
Score
Status
A
Risk analysis
Each member of the team understands the techniques used to assess risk
4
Green
B
Break-even analysis
Each member of the team understands the methods of break-even analysis
5
Green
C
Decision making
Each member of the team understands the importance of using these analytic tools in decision making
3
Amber
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
Audit Summary For each element of the checklist add up the scores of the 3 related questions and divide by 3 – this will give you an average score for that specific element. See example below. Element
Score
0
1
2
3
4
5
Improvement Actions
Strategic fit
2.3
Need to more effectively communicate the overall strategy and current business imperatives
KPI relevance
4.3
KPI Commitment
3.7
Basic knowledge
4.3
Budgeting
1.7
Nee to redesign the budgeting process and link more clearly to the Annual Business Planning (ABP) process
Financial research
2.7
Need to improve the skills levels of the team in terms ability to interpret financial data
Project evaluation
1.3
Need to review the process used for project business case creation and evaluation
Management accounting system
4.7
Relationship with finance department
4.3
Analytic tools
3.9
Need to align the performance system to build greater commitment to KPIs
Need to clarify why financial tools are important and how these feed decision making
In the TVT example above, the managers conducting the Audit have identified that the weakest link is that of the Project Evaluation used (average score 1.3). The plan would therefore be to focus attention on and improve this area within the business first until it was no longer the weakest link. Once the senior management team has increased confidence that the Platform (in this example) has improved, the next stage would be to focus on the Budgeting (1.7) and Strategic Fit (2.3) areas.
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
Virtual ConsultantTM The Virtual ConsultantTM provides a step-by-step guide to completing this business template. It is worded as a series of questions designed to make you stop and think about this topic in a challenging and creative way – as if a business coach or consultant was sitting next to you.
HealthCheck Use the following checklist to assess the current state of your team: Consider each criterion in turn and use the following scoring system to identify current performance: 0 – Not done or defined within the business: unaware of its importance to finance management 1 – Aware of area but little or no work done in the business 2 – Recognised as an area of importance. Some work done in this area 3 – Area clearly defined and work done in the area in terms of finance management 4 – Consistent use of best practice tools and techniques in this area across the business 5 – Area is recognised as being ‘best in class’ and could be a reference area for best practice Then reflect on the lowest scores and identify those areas that are critical to success and flag then as status ‘Red’ requiring immediate attention. Then identify those areas that you are concerned about, and flag those as status ‘Amber’ implying areas of risk that need to be monitored closely. In your finance framework the whole Finance Process is only as good as each individual element. If one ‘link in the chain’ is weak then the Finance Process within the company will not operate to optimum efficiency and there is an increased risk of failure. The action plan therefore should be to focus attention and resources on the elements of greatest weakness first, and then to move the whole framework to a level of excellence. This approach optimises the use of resources and sets up a process of continuous improvement.
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
HealthCheck Finance Use the following blank template to address an issue or opportunity within or business or team
Form 1: Detailed Audit ID
Category
Evaluation criteria
1
Strategic fit
A
Vision
There is a clear statement of corporate visions and strategy
B
Goals
Senior and middle management have communicated the visions and strategy across the business by setting clear and attainable goals
C
Congruence
The team are committed to the goals set for them and understand how they fit in with the overall strategy
2
KPI relevance
A
KPI cascade
There is a clear statement of the KPI’s for both the team and the individuals
B
Briefing
The team is well briefed that if they achieve their KPI’s they will be seen to be successful
C
Contribution
The team’s achieving their KPI’s makes a significant contribution to the organisations goals and strategy
3
KPI commitment
A
Understanding
Each member of the team understands their individual KPI’s and the importance of team success
B
Commitment
Each member of the team is committed to achieving their individual KPI’s
C
Support
When a team member is not hitting a KPI they expect and receive support from managers in correcting the problem
4
Basic knowledge
A
Cash flow
Each member of the team is aware of the crucial importance of cash flow management
B
Income statement
Each team member understands the impact that their activities have on the income statement
C
Balance sheet
The team members understand the difference between capital and revenue expenditure and how a balance sheet reflects this difference
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
Score
Status
Score
Status
Score
Status
Score
Status
5
Budgeting
A
Process
The team understands the company’s budgeting process and has a positive attitude towards it
A
Planning
The team is involved in producing the budget
C
Commitment
Each member of the team is committed to working with the budget
6
Financial research
A
Process
All members of the team are able to read an annual report and extract the data needed for analysis
B
Analysis
All members of the team can interpret the results of financial analysis of key customers, competitors and suppliers
C
Application
The team uses the results of financial analysis to improve their performance
7
Project evaluation
A
Comparison
The team understand that proposed projects will be analysed and compared with other proposals from elsewhere in the organisation
B
Template
The team understands the business case template that the organisation uses for evaluating proposed projects
C
Persuasive communication
The team are successful in presenting clear and cogent business cases
8
Management accounting system
A
Understanding
The team understands the internal financial information system
B
Monitoring
The team uses the internal financial information system to monitor its performance
C
Improvement
Where the information system is weak, there is a plan in place to get the system improved
9
Relationship with finance department
A
Respect
The team respects the contribution that the finance department makes to the success of the organisation
B
Business environment
The financial controller understands the business environment that the team is working in
C
Co-ordination
We keep the finance department up-to-date with our performance and plans through regular communication
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
Score
Status
Score
Status
Score
Status
Score
Status
Score
Status
10
Analytic tools
Score
A
Risk analysis
Each member of the team understands the techniques used to assess risk
B
Break-even analysis
Each member of the team understands the methods of break-even analysis
C
Decision making
Each member of the team understands the importance of using these analytic tools in decision making
Form 2: Audit Summary Element
Score
0
1
2
3
4
5
Notes
Strategic fit
KPI relevance
KPI Commitment
Basic knowledge
Budgeting
Financial research
Project evaluation
Management accounting system Relationship with finance department Analytic tools
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
Status
What is a HealthCheck?
When should you use it?
The Finance HealthCheck template provides a structured method for assessing the current status of the Finance area of your business based on industry best practices.
Make the use of HealthChecks part of your annual review of the critical areas of your business. However, ensure that your improvement actions are planned and monitored on a more regular (quarterly) basis. Note that for some teams, the HealthCheck will also form part of an external audit or compliance process driven by customers or industry regulators.
Why is it relevant? As industries become more competitive survival is about doing more with less whilst still delivering against customer expectations at a level that exceeds the competition. To achieve this you need to: 1) understand what ‘best practice’ looks like, and 2) understand your current performance – ideally against the competition.
Who needs to be involved? The HealthCheck is completed by all those that are responsible for performance in this particular area of the business, but ensure you seek the views of all those involved – even if you do not agree with them. Stakeholders may mainly be internal to the business, but ensure that you get an external perspective involving the views of key customers and suppliers.
How should you implement it? Plan the HealthCheck carefully and ensure that you get the right people involved early in the process. Gather information through face-to-face interviews where possible, although electronic checklists can enable you to involve a larger group. Gather evidence of performance as you go. Then consolidate the various views and look for areas of inconsistency across different stakeholders, and assess areas of concern. Finally, develop a clear action plan with ownership and timings for getting to green or for improving the score on an individual item.
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
HealthCheck Finance This is a case example based on a fictitious company called TVT – all the data is displayed for demonstration purposes only. For a detailed explanation of what each cell is used for please refer to the Virtual Consultant on the following pages.
ID
Category
1
Strategic fit
A
Vision
B
Evaluation criteria Score
Status
There is a clear statement of corporate visions and strategy
2
Green
Goals
Senior and middle management have communicated the visions and strategy across the business by setting clear and attainable goals
3
Green
C
Congruence
The team are committed to the goals set for them and understand how they fit in with the overall strategy
2
Amber
2
KPI relevance
Score
Status
A
KPI cascade
There is a clear statement of the KPI’s for both the team and the individuals
4
Green
B
Briefing
The team is well briefed that if they achieve their KPI’s they will be seen to be successful
4
Green
C
Contribution
The team’s achieving their KPI’s makes a significant contribution to the organisations goals and strategy
5
Green
3
KPI commitment
Score
Status
A
Understanding
Each member of the team understands their individual KPI’s and the importance of team success
4
Amber
B
Commitment
Each member of the team is committed to achieving their individual KPI’s
3
Amber
C
Support
When a team member is not hitting a KPI they expect and receive support from managers in correcting the problem
4
Green
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
4
Basic knowledge
Score
Status
A
Cash flow
Each member of the team is aware of the crucial importance of cash flow management
4
Green
B
Income statement
Each team member understands the impact that their activities have on the income statement
4
Green
C
Balance sheet
The team members understand the difference between capital and revenue expenditure and how a balance sheet reflects this difference
5
Green
5
Budgeting
Score
Status
A
Process
The team understands the company’s budgeting process and has a positive attitude towards it
1
Red
A
Planning
The team is involved in producing the budget
2
Amber
C
Commitment
Each member of the team is committed to working with the budget
2
Amber
6
Financial research
Score
Status
A
Process
All members of the team are able to read an annual report and extract the data needed for analysis
3
Amber
B
Analysis
All members of the team can interpret the results of financial analysis of key customers, competitors and suppliers
2
Amber
C
Application
The team uses the results of financial analysis to improve their performance
3
Amber
7
Project evaluation
Score
Status
A
Comparison
The team understand that proposed projects will be analysed and compared with other proposals from elsewhere in the organisation
1
Red
B
Template
The team understands the business case template that the organisation uses for evaluating proposed projects
1
Red
C
Persuasive communication
The team are successful in presenting clear and cogent business cases
2
Red
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
8
Management accounting system
Score
Status
A
Understanding
The team understands the internal financial information system
4
Green
B
Monitoring
The team uses the internal financial information system to monitor its performance
5
Green
C
Improvement
Where the information system is weak, there is a plan in place to get the system improved
5
Green
9
Relationship with finance department
Score
Status
A
Respect
The team respects the contribution that the finance department makes to the success of the organisation
4
Green
B
Business environment
The financial controller understands the business environment that the team is working in
4
Green
C
Co-ordination
We keep the finance department up-to-date with our performance and plans through regular communication
5
Green
10
Analytic tools
Score
Status
A
Risk analysis
Each member of the team understands the techniques used to assess risk
4
Green
B
Break-even analysis
Each member of the team understands the methods of break-even analysis
5
Green
C
Decision making
Each member of the team understands the importance of using these analytic tools in decision making
3
Amber
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
Audit Summary For each element of the checklist add up the scores of the 3 related questions and divide by 3 – this will give you an average score for that specific element. See example below. Element
Score
0
1
2
3
4
5
Improvement Actions
Strategic fit
2.3
Need to more effectively communicate the overall strategy and current business imperatives
KPI relevance
4.3
KPI Commitment
3.7
Basic knowledge
4.3
Budgeting
1.7
Nee to redesign the budgeting process and link more clearly to the Annual Business Planning (ABP) process
Financial research
2.7
Need to improve the skills levels of the team in terms ability to interpret financial data
Project evaluation
1.3
Need to review the process used for project business case creation and evaluation
Management accounting system
4.7
Relationship with finance department
4.3
Analytic tools
3.9
Need to align the performance system to build greater commitment to KPIs
Need to clarify why financial tools are important and how these feed decision making
In the TVT example above, the managers conducting the Audit have identified that the weakest link is that of the Project Evaluation used (average score 1.3). The plan would therefore be to focus attention on and improve this area within the business first until it was no longer the weakest link. Once the senior management team has increased confidence that the Platform (in this example) has improved, the next stage would be to focus on the Budgeting (1.7) and Strategic Fit (2.3) areas.
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
Virtual ConsultantTM The Virtual ConsultantTM provides a step-by-step guide to completing this business template. It is worded as a series of questions designed to make you stop and think about this topic in a challenging and creative way – as if a business coach or consultant was sitting next to you.
HealthCheck Use the following checklist to assess the current state of your team: Consider each criterion in turn and use the following scoring system to identify current performance: 0 – Not done or defined within the business: unaware of its importance to finance management 1 – Aware of area but little or no work done in the business 2 – Recognised as an area of importance. Some work done in this area 3 – Area clearly defined and work done in the area in terms of finance management 4 – Consistent use of best practice tools and techniques in this area across the business 5 – Area is recognised as being ‘best in class’ and could be a reference area for best practice Then reflect on the lowest scores and identify those areas that are critical to success and flag then as status ‘Red’ requiring immediate attention. Then identify those areas that you are concerned about, and flag those as status ‘Amber’ implying areas of risk that need to be monitored closely. In your finance framework the whole Finance Process is only as good as each individual element. If one ‘link in the chain’ is weak then the Finance Process within the company will not operate to optimum efficiency and there is an increased risk of failure. The action plan therefore should be to focus attention and resources on the elements of greatest weakness first, and then to move the whole framework to a level of excellence. This approach optimises the use of resources and sets up a process of continuous improvement.
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
HealthCheck Finance Use the following blank template to address an issue or opportunity within or business or team
Form 1: Detailed Audit ID
Category
Evaluation criteria
1
Strategic fit
A
Vision
There is a clear statement of corporate visions and strategy
B
Goals
Senior and middle management have communicated the visions and strategy across the business by setting clear and attainable goals
C
Congruence
The team are committed to the goals set for them and understand how they fit in with the overall strategy
2
KPI relevance
A
KPI cascade
There is a clear statement of the KPI’s for both the team and the individuals
B
Briefing
The team is well briefed that if they achieve their KPI’s they will be seen to be successful
C
Contribution
The team’s achieving their KPI’s makes a significant contribution to the organisations goals and strategy
3
KPI commitment
A
Understanding
Each member of the team understands their individual KPI’s and the importance of team success
B
Commitment
Each member of the team is committed to achieving their individual KPI’s
C
Support
When a team member is not hitting a KPI they expect and receive support from managers in correcting the problem
4
Basic knowledge
A
Cash flow
Each member of the team is aware of the crucial importance of cash flow management
B
Income statement
Each team member understands the impact that their activities have on the income statement
C
Balance sheet
The team members understand the difference between capital and revenue expenditure and how a balance sheet reflects this difference
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
Score
Status
Score
Status
Score
Status
Score
Status
5
Budgeting
A
Process
The team understands the company’s budgeting process and has a positive attitude towards it
A
Planning
The team is involved in producing the budget
C
Commitment
Each member of the team is committed to working with the budget
6
Financial research
A
Process
All members of the team are able to read an annual report and extract the data needed for analysis
B
Analysis
All members of the team can interpret the results of financial analysis of key customers, competitors and suppliers
C
Application
The team uses the results of financial analysis to improve their performance
7
Project evaluation
A
Comparison
The team understand that proposed projects will be analysed and compared with other proposals from elsewhere in the organisation
B
Template
The team understands the business case template that the organisation uses for evaluating proposed projects
C
Persuasive communication
The team are successful in presenting clear and cogent business cases
8
Management accounting system
A
Understanding
The team understands the internal financial information system
B
Monitoring
The team uses the internal financial information system to monitor its performance
C
Improvement
Where the information system is weak, there is a plan in place to get the system improved
9
Relationship with finance department
A
Respect
The team respects the contribution that the finance department makes to the success of the organisation
B
Business environment
The financial controller understands the business environment that the team is working in
C
Co-ordination
We keep the finance department up-to-date with our performance and plans through regular communication
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
Score
Status
Score
Status
Score
Status
Score
Status
Score
Status
10
Analytic tools
Score
A
Risk analysis
Each member of the team understands the techniques used to assess risk
B
Break-even analysis
Each member of the team understands the methods of break-even analysis
C
Decision making
Each member of the team understands the importance of using these analytic tools in decision making
Form 2: Audit Summary Element
Score
0
1
2
3
4
5
Notes
Strategic fit
KPI relevance
KPI Commitment
Basic knowledge
Budgeting
Financial research
Project evaluation
Management accounting system Relationship with finance department Analytic tools
© SofTools, 2009. For more information on related products and services, visit www.Fast-Track-Me.com or contact us at: [email protected]
Status
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