Finance for Engineers, Project Managers and Other Technical Professionals

Overview

The purpose of this course is to introduce professionals (in particular engineers, project managers and technical professionals) to the tools available to evaluate and manage projects and other capital expenditure.  

It is important to appreciate the impact of capital expenditure on the financial statements, so the Financial Accounting model is discussed in detail. It is essential for the complete understanding to have an appreciation of the differences between Financial Accounting, Management Accounting and Financial Management.

It aims to introduce engineers to modern financial tools that are available to help them understand and manage projects, and entire businesses better.  A key component of the course is to understand the drivers behind the Capital vs Revenue decision and how each decision impacts the relevant financial statements.  In particular, project evaluation tools are analysed and discussed, e.g. Discounted Cash flow and Payback.  Other terms such as NPV, IRR and WACC are interpreted in detail.

Derivatives play a very important role in project management.  However, the misuse of these tools has given them a bad name.  The course identifies when certain tools should be used and the significant benefits they can contribute.

The course underlines the importance of understanding value measurement, so that key value drivers can be identified and managed.

Every effort is made to apply the tools to current developments in the business world in order to underline the practical application of these tools.

Topics Covered

1. While every organisation has to subscribe to the Financial Accounting model it is rarely, if ever, a good model to make business decisions from.  Simply, the information comes too late and it is limited by certain concepts which will be highlighted.
   However, as this is the model that is so often used to evaluate business performance it will be discussed in detail so that we can understand how to overcome the limitations.
   Participants will at the conclusion of the first day have a framework which can be applied to analyse and interpret any set of financial accounting statements.  How we evaluate the performance of companies listed on the Share Market and the most common tools used to identify ‘value’ will be discussed.
   
2. We will also understand why ‘Cash is King’ and interpret some commonly used words and acronyms, e.g. EBITDA, ROCE, CFROI, etc
   
3. While Financial Accounting is compulsory, Management Accounting is not.  However, organisations with excellent Management Information Systems have a significant competitive advantage.  A key part of understanding a company’s ‘bottom line’ is to analyse it from a customer perspective.  Customer profitability analysis is an extremely useful tool to add value to an organisation without necessarily cutting costs.
   
4. Cutting costs is often a knee jerk reaction when a company comes under pressure.  It is seldom sustainable and has the potential to erode the human capital and other intangibles in an organisation.  Putting a measurement system in place so these intangibles can be managed is an essential part of modern financial management.
   
5. Risk is a key component in the valuation model.  Increased risk implies an increased return and therefore value is compromised.  If we can manage risk and build certainty into our future cash flows we can add value.  Derivatives are tools that help us to manage uncertainty.  We will discuss the pros and cons of the most commonly used derivatives.
   
6. Strategic Management Accounting is an evolving discipline that links accounting to the strategy development process in organisations.  For example many organisations have realigned their strategy to address responsible businesses practices.  Corporate Social Responsibility was once thought to give an organisation a competitive advantage.  Today it is considered a competitive necessity.  For example, charitable donations written off as an expense in the Statement of Financial Performance may in fact be a key value driver.  The course will examine how Value Drivers are identified and what benefits they deliver.
   
7. Perhaps the biggest mistake that an established business can make is paying too much for an acquisition, or selling part of the business for too little.
   The course will discuss the most commonly applied valuation tools.
   
8. Finally, we will look at the most widely used tools to appraise the Investment decision.  Discounted Cash Flow (DCF) Analysis that works out the Net Present Value of an Investment (NPV) is an essential tool for managers to appreciate.  It is now the most common valuation tool to value an entire enterprise.  How we forecast cash flows and measure the required rate of return (cost of Capital, WACC, IRR) will all be discussed.

Who should attend

This course is aimed at all engineers, project managers and technical professionals.  Importantly, it is not trying to make people into accountants; rather it aims to give engineers, project managers and technical professionals  the tools to understand the numbers in order to help them make better business decisions.

Outcomes

By the end of the course, participants will be able to:

• Understand what drives some of the most common errors in business and how to avoid them
• Break through the language of finance
• Understand the basic accounting model and its limitations
• Analyse and interpret financial statements within the context of industry analysis and macroeconomic fundamentals
• Realise why ‘cash is king’
• Identify risk and understand the options available to manage risk
• Apply management accounting tools to business problems
• Understand the Budget process and forecasting techniques
• Link financial objectives to strategy
• Identify key value drivers to help manage the value of a business
• Understand different valuation techniques and respective benchmarks