Commercial Finance

Whether your firm is a new venture start-up, a developing business or a mature organisation, managing the finances is an inherent part of the business course.

Managers must be able to identify investment opportunities, raise capital, maximise financial value, understand cash flow management and align the financial interests of the firm with those of various stakeholders.

What is Commercial finance?

The commercial finance domain is large and complex with varying functional areas that generally includes financial accounting, management accounting, corporate finance, investments and financial risk management.

Financial accounting objectively reconciles and reports on historical periodic transactions in order to present statements of income and expenditure, financial positions, cash flows, movements in equity and asset scheduling all based on events that have taken place in the past. Moreover, financial accounting is most closely related to taxation and auditory compliance and other regulatory frameworks designed to meet the needs of diverse external users of the firm. Paradox Strategic Management IS NOT a financial accounting firm. We will work closely with your financial and taxation adviser/ team and if you are not adequately resourced in this area, we will help you identify a suitable partner with strategic planning in mind.

Paradox Strategic Management DOES however provide the following services;

Management accounting (MA) which subjectively focuses on information management to capture and create further value by decision making inside the firm. Managers have discretion on how this is achieved although international standards are encouraged but not mandatory. MA involves measuring financial, operational, physical, technological, supplier, customer and competitor processes in order to judge and validate current and future expectations. MA addresses costs associated to certain activities and behaviours, technical considerations, value-chain efficiency, product margins and volumes, pricing, productivity and performance measures, holistic measures, budgeting, forecasting, debt and asset management.

Business finance, investments and risk (BFIR) which involves transporting financial value across time otherwise known as ‘the time value of money’. BFIR also focuses on project analysis, dividend policies, working capital management, asset class investment analysis, merger and acquisition planning, portfolio theory, debt and security analysis, investment funds, risk and return, efficient diversification, capital asset pricing and arbitrage, financial market analysis, technical and behavioural analysis, macroeconomic and industry analysis, equity valuations, options, futures and foreign exchange management.

Paradox Strategic Management has first-hand experience in management accounting, business finance, investment and risk management and we can assist you with any of the following;

• Cost management concepts and behaviours (Learn how to exploit costs relative to occurrence and cause, recognise and predict cost patterns and profits relative to sales levels, prepare regular periodic or rolling accountability measures, assess opportunity costs with short v’s long term impacts, activity-based costing, capacity and throughput accounting methodologies)

• Cost management systems (Determine what expenses to assign to various departments or activities, job-order costing, process costing, absorption and variable costing decisions, formalisation of cost objects and drivers, develop information technology for enhanced decision making)

• Activity and process information (Understand unitary measures, learn about labour recovery and the real cost of labour, scarce resource leveraging,  value work-in-process and understand it’s impact, allocate repreciation and amortisation expenses, distinguish between primary and support activities, trace costs from activities to products/jobs, to make or to buy analysis, rework and back-costing analysis, information accuracy and trade-offs)

• Product and service pricing (Recognise cost, volume and profit opportunities, apply various types of costs to different products and/or services or product/service groups, understand the difference between mark-ups and margins, apply various pricing strategies, prepare categorised sales and volume forecasts, manage profitability between customers, products/services/jobs and relevant groups/ranges)

• Value-chain performance measures (Design a management accounting and control system that recognises where value is added, understand total-life-cycle-costing, environmental and bench-marking considerations, determine value in research and development, cost-targeting, investing in  quality, ‘Kaizen’ costing)

• Motivation and controls (Development and implementation of human resource participation and personal goal setting to measure and account for key activity or point indicators, establish unified purpose and individual level contribution targets, develop ethical codes to promote integrity of measures, develop incongruence measures between stated and practiced behaviours, mixed performance measures, incentive and reward systems)

• Balanced scorecards (Development of performance objectives-, measures- and targets across financial, customer, processes, learning and growth  imperatives, align the measurement system with strategic mission and vision)

• Budgeting and forecasting (Determine capacity and flexible resource levels, prepare a master or operational budget, consider behavioural issues, sales-, production-, labour-, training-, capital spending-, administration- and cash flow planning, demand forecasting, what-if and sensitivity analysis, variance analysis, periodic and continuous (rolling) budgeting, net-present-value considerations)

• Present and future value determinations (Understand the time-dated value of money, opportunity cost considerations, determining appropriate time periods to measure, periodic rates of return and ‘time zero’ equivalents, compounding, ‘n-period’ annuity planning)

• Project planning (Plan and estimate project-based financial inputs and outputs, dealing with uncertain cash flows, strategic issues, non-financial considerations, present-value and future cash flows, sensitivity analysis and real options) 

• Capital raising (Identify funding requirements and appropriate timeframes, select suitable sources of capital, debt and/or equity considerations, asset and security control, utilisation rates and allocations, share issues and allocations, share options, debt and security conversions, bonds, private and public offerings, bank lending leasing considerations, business case and proposal preparation)

• Financial policy development (Develop strategic financial objectives, formalisation, planning and reporting structures and accountability measures, capital and funding structures and strategies, protective covenants, accounts payable and receivables policies, dividend policies, leveraging and risk, tax shielding and firm value considerations)

• Takeovers, mergers and acquisition planning (Planning for proxy contests, leveraged and/or management buyouts, horizontal and vertical integration considerations, adding economic value, present value considerations, cash and security financing, tactics, earn-out and earn-in agreements, evaluation and negotiation)

• Risk and return (Determine the weighted average cost of capital, risk-free rates, risk premiums, tax and economic factoring, pay-back and holding periods, accounting rates of return (ROR), internal rates of return (IRR) and net-present-value discounting, systematic and fundamental factoring, understanding market efficiency)

• Portfolio management (Understanding risk and return premiums and aversion, scenario analysis and probability distribution, measures of volatility, inflationary impacts, normal interest rates, risky and risk-free asset allocations, optimal-risky and passive investing, efficient diversification, minimum opportunity variances and the efficiency frontier, capital asset pricing and arbitrage theory)

• Equity and debt valuations (Bond pricing and yields, annuity analysis, intrinsic v’s market values, price-earnings-, dividend discount-, constant and/or multi-stage growth analysis, free-cash flows to equity and the firm)

• Technical and fundamental analysis (post-diversification risk awareness, historical financial statement evaluations, internal organisational factors, future earnings and dividend considerations, future interest rate impacts, global and domestic macroeconomic considerations, government policy impacts, business and industry cycle analysis)

• Derivatives, futures and FOREX (Options and forward contracts on shares, other securities and assets, hedging on capital costs-, foreign currency and key commodities, collaring, indexing and other insurance mechanisms for financial risk mitigation)