Tools for Improving Competitiveness María De Los Ángeles Rivera, CPA – Partner, Kevane Grant Thornton Red de Mujeres Empresarias CCPR January 19, 2012 San Juan, PR

2 © Grant Thornton International Disclaimer DISCLAIMER: This presentation and its content do not constitute advice. Attendants should not act solely on the basis of the material contained in this publication. It is intended for information purposes only and should not be regarded as specific advice. In addition, advice from proper consultant should be obtained prior to taking action on any issue dealt with in this presentation.

3 © Grant Thornton International Objectives an overview of the different tools derived from the financial information related to the decision-making process for current and future businesses relationship between the financial information (reporting, financial plans) and efficient business management highlights of world class business management tools

4 © Grant Thornton International Effective business owners all know one thing... no matter how great your product, your service or marketing… –if you don’t manage your money and run out of cash… it will all have been in vain you need to understand the fundamentals of financial management

5 © Grant Thornton International Effective business owners all know one thing... main goal – to make money why do entrepreneurs fail? –they run out of money

6 © Grant Thornton International Categories of understandingof the entrepreneur or manager level one –entrepreneur or manager knows very little or nothing about how to track the financial health of their business and use the management accounts to make wise strategic decisions

7 © Grant Thornton International Categories of understandingof the entrepreneur or manager level two –entrepreneur or manager understands enough to be able to get someone to set up a decent financial system, to read a basic financial report and to ask intelligent questions about what he or she sees in a set of management accounts –will usually rely on someone else to deal with the day- to-day financial details but will be party to the important financial decisions and able to identify problem areas

8 © Grant Thornton International Categories of understandingof the entrepreneur or manager level three –background in finance and will get involved in the financial details of the business, understanding the details of every transaction and how it affects the business –although this is useful, it is not essential – because you need to identify other areas and not get loose in the financial details –you should be able to operate at level two

9 © Grant Thornton International The formula QP +QE = SP Quality in Planning + Quality in Execution = Successful (Profitable) Project

10 © Grant Thornton International Methodology - Financial Information Dashboard – Key Performance Indicators Day to day (source and use) past (historical) –financial statements present –comparative information –decision making document –cash flow future –projected financial information Project Support + Execution = Veracity – Reliability

11 © Grant Thornton International Reporting techniques Reporting Forecast Present

12 © Grant Thornton International Key performance indicators General indicators (up to date and comparative to prior period and budget) sales collections cash balance used/unused resources (capacity) expenses bottom line (net profit) Industry specific (depending on type of business, i.e.) inventory overhead OWNER DRIVEN

13 © Grant Thornton International Key performance indicators extraordinary events (internal or external) – –opportunities –awareness –risk

14 © Grant Thornton International How to put capital to work and succeed S + A + E = $$ Solid foundation + Assertive Game Plan + Efficient Implementation = Succe$$

15 © Grant Thornton International “Money is the lifeblood of business” Cash is the lifeblood of business

16 © Grant Thornton International Cash cycle analysis to unlock cash within your business –to have more cash to grow in the business you need to try to: »try to reduce the number of days in accounts receivable »try to reduce the number of days in inventory »try to increase the number of days in accounts payable –within a range that is reasonable and sensible

17 © Grant Thornton International Decision making methodology (how to use)

18 © Grant Thornton International Premises Entrepreneur where am I? what do I want? where am I going? how will I get there? my present relation with my company: is it working efficiently, are we developing our outmost potential? Enterprise where are we? what do we want? where are we going? how will we get there? present company scheme: is it working efficiently, are we developing our outmost potential?

19 © Grant Thornton International vision of the business local and global vision own vision my team's vision

20 © Grant Thornton International Three elements of a business infrastructure decision making structure people

21 © Grant Thornton International Business virtuous cycle 3. Institutionalization 4. Permanency 5. Innovation 1. Efficiency 2. Growth

22 © Grant Thornton International Questions…