Competency Standard
T9 Managing Finances

Introduction
To develop knowledge and understanding of the way organisations finance their operations, plan and control cash flows, optimise their use of working capital and allocate resources to capital expenditure projects.

Underlying Knowledge

1. Cash receipts and payments
1. Types of receipts and payments
2. Cash budgets and forecasts
1. form and structure of cash budgets and forecasts
2. modelling of sensitivity of elements to change (e.g. price, wage rate changes)
3. preparation of cash budgets, including adjustments for timing
4. preparation of simple cleared funds forecasts
5. budgets and forecasts as mechanisms of monitoring and control
3. Accounting for cash
1. relationship of cash flow accounting to accruals accounting
2. profits and cash flow
4. Cash management
1. role of the treasury function
2. cash handling procedures
2. Cash balances
1. Surplus funds
1. types of investments
2. investment risk and exposure
3. short and long-term investment management
2. Liquidity management
1. optimum liquidity levels
2. liquidity ratios and the working capital cycle
3. comparison with cash budgets and forecasts
4. legal relationship between bank and customer
5. statutory and other regulations relating to cash management of public sector organisations
3. Working capital management
1. Importance of working capital management
2. Working capital cycle
3. Inventory control
1. inventory ordering and storing policies
2. economic order quantity
3. impact of lean manufacturing and just-in-time
4. Trade payables control
1. trade payables monitoring
2. payment procedures
3. risks of excess credit
4. Credit granting
1. Information sources
1. internal sources of credit information
2. external sources of credit information
3. interpretation of credit information
2. Credit terms
1. credit policies
2. individual customers
3. Accounts receivable records
1. content of records
2. data protection issues
4. Legal issues
1. basic contract
2. terms and conditions of contracts relating to the granting of credit
5. Accounts receivable collection
1. Monitoring of credit customers
1. internal sources
2. external sources
2. Collection of accounts receivable
1. methods of collection
2. factoring arrangements
3. invoice discounting
4. accounts receivable insurance
3. Dealing with slow-paying credit-customers
1. identification of potential problems
2. methods of contacting credit customers
3. legal procedures for recovery of debts and breach of contract
4. bankruptcy and insolvency of credit customers
6. Sources of finance
1. Overview of the economic environment
1. banking system and money market in the UK
2. relationship between financial institutions
3. impact of government and central bank monetary policy
2. Sources of finance Discussion of the relative risks and costs of various types of finance and their suitability to different circumstances and organisations (large and small, listed and unlisted), including:
1. balance of short / medium / long-term finance
2. the nature and importance of internally generated funds
3. capital markets
4. bank finance (short, medium and long-term)
5. hire purchase, finance and operating leases
6. trade credit
7. government sources
8. problems of small and medium-sized enterprise financing
9. venture capital and other financial sources particularly suited to the small and medium sized enterprises
3. Calculations for relative gearing and EPS under different financial structures
7. Capital investments
1. Nature of capital investment budgeting
2. Capital investment procedures (authorisation and monitoring)
3. Non-discounted cash flow methods of project appraisal
1. accounting rate of return
2. payback
4. Discounted cash flow techniques
1. time value of money
2. compounding and discounting
3. relevant cash flows
4. net present value
5. internal rate of return
6. discounted payback

Performance Criteria

1. describe the cash flow cycle
2. describe sources of short, medium and long-term finance
3. prepare cash budgets and cash flow forecasts
4. explain the principles of effective working capital management
5. calculate working capital requirements
6. describe credit management methods and procedures
7. describe cash management methods and procedures
8. evaluate capital expenditure proposals.

Assessment Methods

• Testing of underlying knowledge through online written or oral examinations. The examination procedure will be recorded.
• Proceedings of solutions to problems based assignments will be recorded as multimedia presentations or demonstrations, and organized as a portfolio for assessment.

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