What financial condition is your Agricultural Society in?

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What financial condition is your Agricultural
Society in?

• Understanding your financial performance

Presented to the Alberta Association of
Agricultural Associations Yvonne Barthel, Senior
Manager KPMG Lethbridge (403) 380 5744 Friday,
February 10, 2006
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Welcome!
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Agenda

• The Budget Do you have a plan?
• What financial condition are you in?
• Your financial statements what do they say
  about you?

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How many accountants does it take to change a
light bulb?

• Two. One to change the bulb and one to check it
  was done within budget.

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The Budget

• Planning for Success

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The Budget Your Financial Road Map

• A budget is the translation of strategic plans
  into measurable quantities that express the
  expected resources required and the anticipated
  returns over a period of time.
• A detailed estimate of future transactions,
  designed to provide a plan for and control over
  future operations and activities.

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Budget Scope

• Budgets are normally developed for a specific
  program of activities
• Budgets are prepared for
• Operations
• Capital expenditures
• Cash Flow

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Budgets - The 4 Basic Functions

• Planning
• Coordinating and communicating
• Monitoring progress
• Evaluating performance

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Planning

• Involves a process to ensure the organization
  will have the necessary resources to achieve its
  goals.
• It involves building assumptions to facilitate
  economic modeling
• Strength of the budget is dependent upon thorough
  planning

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Coordinating Communicating

• Coordination involves pulling the pieces together
  to achieve the Master Budget.
• Expresses the organizations overall financial
  objectives and strategic goals.
• To achieve success, communication is essential.

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Monitoring Progress

• Timely and periodic monitoring allows management
  to track progress by comparing actual results to
  expected or planned results.
• Through the monitoring process we are able to
  identify variance. We can then take action to
  ensure we stay the course.

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Tracking your budget

• To track your budget
• Assess monthly revenue performance versus budget
• Assess monthly expense performance versus budget
• Determine the effect variances will have on your
  overall bottom line

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Evaluating Performance

• Managers are held accountable for the performance
  of their department and their contribution to the
  goals of the organization as a whole.
• Performance is often evaluated against the budget
  or plan.

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Tips for Effective Budgeting

• Stay goal-oriented
• Be realistic, achievable but with stretch
• Dont try to do it alone
• A budget is not a substitute for regular
  communication
• Dont use the budget to deny requests
• consider if part of your mandate

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Where do we start?

• Analyze the organizational strategy
• Understand the targets
• Document your assumptions
• Quantify your assumptions
• Take a step back

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• To some degree, preparing a budget involves
  crunching numbers a process being left more and
  more to financial models, computers and
  technology.
• Behind the budget are people - like you - who
  develop the assumptions, people who know the
  operations and consider the strategic goals.

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Analyzing Financial Performance What financial
condition are you in?Accounting will prove
anything. Even the truth!
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Analyzing and Interpreting Financial Statements

• Financial Statements provide a wealth of
  information
• Analyzing and interpreting this information is
  key to making informed decisions and developing
  successful strategies

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Analysis and Interpretation

• What do the numbers tell us?
• How can we use the financial statements in
  financial forecasting?
• Value of informed decision making.

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Tips for Analyzing

• Consider the context
• Compare your department to your peers
• Watch for trends

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Financial Statement Analysis

• Comparison to budget
• Comparison to prior years
• Trend analysis
• Peer group comparison

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Ratio Analysis

• Provides a means of digging deeper into the
  information contained in the financial
  statements.
• A financial Ratio is a means of expressing key
  components in relation to other components
• Value added when compared to peers or a
  predetermined benchmark

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Ratio Analysis normally four areas

• Liquidity Ratios
• Profitability Ratios
• Operating Ratios
• Leverage Ratios

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Liquidity Ratios

• Current ratio
• Current assets / current liabilities
• Quick ratio
• (Cash short-term investmentsA/R) / Current
  liabilities

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Profitability Ratios

• Not as relevant for NPOs
• Return on assets (ROA)
• Return on equity (ROE)
• Return on revenue (ROR)

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Operating Ratios

• Days in receivables
• Days in payables

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Leverage Ratios- what is the strength of your
organization?
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Strength of your organization

• Capital assets what is yours versus
  externally funded?
• Age of assets accumulated depreciation as a
  of total assets.
• What is the age of your facilities?
• will determine how much is required in reserves

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Strength of your organization, contd

• Interest coverage
• Net assets as a of total assets
• Debt to equity

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What are your financial statements saying about
you?

• What are your (future) plans?
• Have they been determined?
• Are restricted net assets reflecting your goals?

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What are your financial statements saying about
you?

• Are comparisons to budget reflected?

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What are your financial statements saying about
you?

• Statement of cash flows
• Prepared in accordance with generally accepted
  accounting principles
• Peer to Peer
• i.e. depreciation

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• What is the definition of an accountant?
• Someone who solves a problem you did not know
  you had in a way you don't understand.

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• Members are your users
• What do they see?
• Their view of your organization may be affected

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• Questions?