Data Requirements
1.
2.
3.
4.
Copy of current budgets/ operating plan
Copy of most recent long term/strategic plan
Current forecast of P&L for the current year
Copy of P&L statements for last 5 years
Elements to include: revenues, COS, variances,
G&A, R&D, S&M, taxes, other charges
4.
Breakout of cost structure for the last five years
COS - Direct labor
Direct material
Dther direct costs
Variable overhead
Fixed overhead
Please list top 5 elements in each category and their %
of the total for those periods
Please breakout variances under COS to include:
Rework
Other labor var
Scrap
Mat'l price
Mat'l usage
Overhead variances
Obsolescence/reserves
5.
P&L breakout by product line if appropriate
6.
Quality costs by quarter for last 3 years
Rework
Scrap
Quality dept cost
Other quality related labor
Training costs
COS +/- change in WIP inventory
COQ = quality cost/ (cos +/- change in inv)
7.
Headcount - by major dept/group, last 3 years
Breakdown between direct/indirect labor within groups
8.
Actual annual cost per employee including benefits (exempt &
non-exempt)
9.
Actual expenses vs. budget for last year by major function dept.
10.
Balance sheet - current and last five years
11.
12.
Inventory trend - by month or quarter, last 2 years
Total $/£
Weeks of Inventory
Obsolescence/excess
Accounts receivable
Total $/£ billed
Any amounts not yet billed, and why
Aging
13.
Fixed assets
Total $/£
Direct amount vs. any allocated
14.
PEI trend for last 3-5 years
Total revenues/total people costs
15.
What is historical trend (5 yrs) on overhead rates?
Definitions
1.
Please define your terms and acronyms for clarification. Particularly
what items are included in various components.
tell us
Information
1.
When are revenues recognised?
2.
Is this the same time as billing occurs?
3.
If not, please describe the difference.
4.
Are there any concerns around data integrity?
5.
What are the key financial criteria that managers are measured/
rewarded
against?
6.
What control procedures are in place for expenses, direct materials,
capital? Describe approval process and authorisation limits.
7.
What are the organisations financial goals?
8.
What is the pricing mechanism? Who determines prices?
9.
Describe your costing system
If working with std. costs, how are stds. set? (both labor & mat'l)
10.
Is there any other information that you believe is appropriate to our
understanding of the total financial picture?
Developing Financial Benefits
¥
Headcount reductions
$/person/year x headcount reduction (range) = savings
- Reductions based on:
¥
range
UR's prior experience
prior ratio's at client
specific identified improvements
knowledge of competitive structures
Asset Reductions
- Inventory
- WIP reduction based on:
cycle time decreases
change in work stations
capacity modifications
- other inventory based on: change with vendors on
timely delivery
systems management
inventory alignment
- Accounts receivable based on:
reductions in days
improved systems
timely processing of
invoices
- Can measure above based on one-time $ reductions to
flow or in annual cost of money savings
($ reduced x COM)
- For inventory reduction, can use inventory carrying cost
x total inventory reduction( but test with client, it is
less precise than cost of money plus other
specific savings)
¥ Cycle Time Improvements
- Revenues achieved sooner
- $ revenue brought forward x cost of money x
period
- Lower cost of errors
- $ scrap or rework impact
¥ Unit Cost Reduction
- Production volume/year x $/unit
or
- Sales volume x cost decrease as % of sales
cash
much
Financial Analysis Techniques
¥
Trends
Revenues
Profits
Profits as % of sales
Inventory levels, turns
Gross margin %
Headcounts, direct & indirect
Scrap , yield %
Cost of quality
People effectiveness index (revenues / people costs)
Elements of cost of sales
ROI
Variances
-
¥
Look at for the entire business
Break down for business segments where applicable
Paretos
Cost elements
Material, labour, overhead, G&A
Revenues by product line, customer
Margins by product line, customer
Variances ( labour, material, overhead, scrap)
Inventories
¥ Ratios
etc.)
Profitability ( ROI, ROS, etc)
Liquidity ( current ratio, acid test, interest coverage,
Asset utilization ( inventory turns, days rec., days
¥
Return on Investment
Compare to competition
Decompose equation
P&L, elements of cost
Assets, liabilities
¥
Sensitivity Analysis
ROI, if change an element by 1%,5%,10%,20%, what is
to ROI
Examples of Intangible Benefits
etc.)
pay,
impact
¥
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Improved customer satisfaction
Improved employee morale
Improved price leadership
More effective management ( enhanced skills)
Enhanced market recognition
Improved competitive position
Clearer communications
Design stabilization
Revitalized team-work
Clearer roles & responsibilities
Clearer accountabilities and authority levels
Better management discipline
Development of co-consultants skilled in:
Project management
Planning
Implementation
Team building
Information available at critical times
Improved organization structure
"Change model" for migration
Alignment of top management vision
Heightened cost awareness
Improved management control systems
Effective problem management
More effective interfunctional interfaces
Better cultural integration
Streamlined procedures
Shared vision & commitment throughout organization
Examples of Tangible Benefits
Quantifiable
Financial
¥
Inventory reduction
¥
Accounts receivable reduction
¥
Cost of money of asset reductions
¥
Overhead reductions
¥
Direct labour reductions
¥
Direct material reductions
¥
Revenue enhancements
¥
Profit improvements
¥
ROI improvements
Non-Financial
¥
Schedule reduction
¥
Manufacturing cycle time reduction
¥
Labour efficiencies
¥
Quality measures ( yields, rejects, etc )
¥
Percent on-time delivery
¥
Direct labour/Indirect labour ratios
Non-Quantifiable
¥
Impacts resulting from secondary effects of direct
of the above areas
( ex: direct labour reductions due to material process
improvements)
¥
Any of the quantifiable measures that cannot obtain
¥ Potential revenue enhancements resulting from:
Earlier introduction of product to market
Increased market share, available market size
Additional products in the marketplace
Extended product life cycle
¥ Savings to future products and product lines
efforts in one
flow
data
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