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To steer the company, it is necessary for the manager to know where he is going, what is most commonly called the vision. From this vision, he will use the principles of Hoshin Kanri to deploy it within the company.

Introduction

To steer the company, it is necessary for the manager to know where he is going, what is most commonly called the vision. From this vision, he will use the principles of Hoshin Kanri deploy it within the company and build its financial plan.

Vision and Accounting

From the balance sheet, we will correlate and validate the actions against the accounting data. We find most generally a diagram of this type.

Vision

Strategic plan

Objective

 5 / 10 years Horizon

Operational plan

Indicator – 2 / 5 years  Horizon

Investment plan

Financial plan

Forecast profit and loss accounts

budgets

1 year  Horizon

Investment budget

Cash budget

Operating budget

Dashboard and reporting

1 day to X weeks

 

Strategic Elements

As we can see, there are 2 categories of elements in the table above. Purely strategic elements stemming from vision and choices, and purely financial elements.

For purely strategic elements, they are described in the article on Hoshin Kanri. You will find the vision, the strategic plan and the operational plan.

Financial planning

Its purpose is to match the investment needs with the resources that the company is able to mobilize. This planning answers 3 basic questions :

  • The ability of the company to absorb investments and disinvestments in the short and medium term. 
  • The ability to reconcile its investment and financing plans. 
  • Predict the financial profile of the company in the following years.

The investment and financing plan

The logic of the medium-term financial plan leads to the construction of a provisional financing table in which the following elements have been incorporated: :

  • Budgets for existing activities. 
  • Budgets for selected investment projects. 
  • The finances available to the company taking into account the costs related to these finances (dividends…).

 

The plan will be represented as follows :

Years

N + 1

N + 2

N + 5

Financing needs :

  • Investments
  • Investments in WCR
  • Loans granted by the company
  • Repayment of debts
  • Dividends to be distributed

Total financing needs (1)

Funding Resources :

  • Capital increases
  • Cash flow
  • Investments
  • Divestments in WCR
  • Medium and long-term loans
  • Loans repaid by others

Total funding resources (2)

Change in annual cash flow (3 = 2 -1)

Initial cash (4)

Final treasury (5 = 3 + 4)

 

The projected income statements

From this investment and financing plan, we will build the income statement. This is a financial statement intended to represent the net income (profit or loss) and the elements that made it possible to calculate it. Using our forecast data, we will predict our results in the short or medium term.

It is built quite simply by representing :

  • In the left column, the projected expenses.
  • In the right column, the takings.

 

It looks like this :

 

Expense

Takings

Consumed purchases of goods (change in stock)

Externes expense

  • Water, electricity …
  • Insurance 
  • Communication

Staff costs

  • Salary
  • Contribution

Dues and taxes

  • Learning tax 
  • Property tax

Depreciation and provisions

Other

Revenue

Operating profit

Right Column – Left Column

Financial charges (interests…) Financial income (interest received, investments…)

Financial result

 Right Column – Left Column

Outstanding charges

  • Penalty

Exceptional products :

  • More values

Outstanding result

  Right Column – Left Column

Result

Operating result – Financial result – Outstanding result

 

The investment budget

This is the consequence of the investment plan. It will correspond to the different envelopes given to the managers of the services in charge of planned investments, and allowing it to carry out the projects. This envelope is valid for the year.

The operating budget

This is the consequence of the income statement. These are the envelopes given annually so that service managers can meet their general objectives.

The cash budget

This is the synthesis of the different financial flows (collection and disbursement) :

Cash receipts

Disbursements

  • Accounts receivable
  • Grants receivable
  • The release of the loan (s)
  • Contributions of cash in capital or associate current account
  • Possible tax credits and refunds (VAT…)
  • Disposal of fixed assets 
  • The supplier debts 
  • Expected salaries and social charges 
  • Budgeted investments (fixed assets …)
  • Taxes (VAT) …
  • Loan repayments
  • Repayments of contributions into partners’ current accounts
  • The accounts payable 
  • Expected salaries and social charges
  • Budgeted investments (fixed assets …) 
  • Taxes (VAT) … 
  • Loan repayments 
  • Repayments of contributions into partners’ current accounts 
  • Dividends

 

The interest of this budget is to follow movements month to month to anticipate downturns and problems of “cash”. As a result, it is necessary to be able to identify payment deadlines for cash receipts or disbursements to improve the accuracy of the valuation.

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