Mark DSouza – (Inspiron) Note on finance for non finance workshop -1
KE inspiron workshop on Finance for non-finance was conducted on 16th June 2023 as part of series of knowledge sharing initiative by KE.
Workshop was conducted by CA Mark D Souza which was attended by 40+ participants, which focused on understanding the fundamentals of personal and organizational finance in a simple way and how to unlock the secrets and fine prints hidden in the Financial Statements. Highlights of the workshop are given below:
Finance for non-finance is the term we often hear but we do not take that first step to learn/upgrade to know the essentials of Financial literacy. It is said that “Good financial Management, by itself cannot lead to success. But Bad financial Management can single handedly spell doom for any business.” Financial management plays a key role not only in business but also in personal finance.
Workshop covered the basics of finance and accounting and the Process Flow of Accounting in pre and post digital era. Overview of how all financial transactions that takes place in an organization get recorded in the books of accounts and how these entries get summarized and ultimately lead to the preparation of the two most important financial statements called the Profit & Loss account and the Balance Sheet, was demonstrated in a simple manner with examples of business transactions.
Participants were introduced to the Statement of Profit & loss account, why it is prepared, its format and its contents were explained in a simple manner, as the name suggests, that it is prepared to find our whether an organization has made profit, or a loss and it contains Expenses and incomes. Similarly, the meaning of Balance sheet was explained, which lists an organization’s Assets and Liabilities, and it shows financial status or the net worth of the organization/individual at a set date.
Common misconception of non-accounting person that in order to learn how to read Balance Sheet ,one must also know how to make them. It was demonstrated that, one need not know how to prepare Balance Sheet and Profit & Loss account the conventional way, how the accountants prepare and there are simpler ways to make them the layperson’s way:
One should understand this simple concept that, everything that happens in an organization over a certain period must eventually appear either on the face of the Profit & Loss account or the Balance Sheet. These are called financial transactions which together are classified into four types: 1.Expenses 2. Incomes 3. Assets 4. Liabilities
If one wants to make these two financial statements the non-accountants way, examine each financial transaction that takes place, assess whether it is an Expense, or an Income or an Asset or Liability and record it accordingly. Your Balance sheet and Profit & Loss Account will be ready without any prior knowledge of accounting. This was demonstrated as the participants gave examples of their own business transactions which were analyzed by them under the four categories and recorded them in the template of Financials shown to them.
Whether you are an investor, entrepreneur or aspire to be entrepreneur or home maker it is essential to be aware of how to unlock the secrets and fine prints hidden in the Financial Statements to take control of your financial decisions. Some of The terms used in Financial statements like Revenue, Gross profit, Operating profit, Net profit, Current assets, Fixed Assets, Cashflow, Inventories and the important ratios like Return on Investments, Current ratio, Trend Analysis based on revenue etc. were explained as introduction to the interpretation of Financials.
While covering the topic of cashflow it was reiterated that It is important to note the distinction between being profitable and having positive cash flow. Profit and cash flow are related but need not be same as just because a company is bringing in cash does not mean it is making a profit (and vice versa). Tips for Managing Cash Flow better were covered.
Once you get your basics right, half the job is done. Accordingly, this workshop was designed to understand the basics of accounting, Fundamentals of Financial statements and how to read them as the first series of awareness programme on financial management. Once we learn to understand, interpret and analyze Financial statements those who aspire can take the next level which includes Financial Planning, Investment Planning, Asset Allocation. Financial Products and finally the Advance to learn: How to raise and deploy funds? How to evaluate Various business projects?
Workshop concluded with the question and answers session.