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How to Sharpen Financial Competence for Directors and Executives

Financial competence is not a static variable, in that it is something that is ever-changing, and the skills associated with being financially competent must be sharpened consistently. The fact is that failure to have financially competent decision makers can be highly destructive to an organization. What is meant by “financially competent” goes well beyond being able to identify credits or debits or being able to properly read financial reports. Being financially competent should focus on one’s ability to break down the financial information provided in those reports and analyze how they should be used to determine the financial path of the organization going forward.

Furthermore, a person must be able to understand how risk factors into the financial decision making matrix and how that risk should affect the courses of action taken by the company. These are the things that separate competent financial management from incompetent financial management. This is likely a major reason why roughly 21% of all CEOs serve in a financial oversight position prior to becoming a CEO and why almost a third of CEOs have served in a financial capacity at some point in their careers. It is also important to realize that the outcome of certain situations has no bearing on the competence of the decisions that have been made. The fact is that poor financial leadership can still yield success from a periodic standpoint. In the same manner that an unskilled Poker player can have a run of “good luck” and win big in a night of gambling, so to can incompetent financial managers “GET LUCKY”.

The problem with depending on luck to manage the financial infrastructure of an organization is two-fold:

1. Luck does; and will always run out at some point in time
2. Financial management isn’t gambling; especially when considering what’s at stake whether it is the shareholders, the market, the employees, or the customers; there is simply too much at stake to make financial management a “Coin Flip.”

To ensure that the key decision-makers are financially competent it is incumbent upon management to analyze the knowledge of these individuals and provide opportunities for them to update and hone their skills as it relates to financial management. The good news is that most organizations generally select the financial decision-makers within their organization by doing a thorough search; this generally allows them the opportunity to select the person that they feel best can handle the position.

Furthermore, most organizations that utilize committees to help manage operations have a financial management committee (as it is considered to be the most common among companies with three or more committees). The problem is that many companies don’t understand the position enough to fully handle this search, so they end up hiring people that have had past success without determining whether the source of that success was luck or skill.

If the current global economic calamity has taught us anything; it has taught us this: When the economic climate is advantageous to organizations it is much easier to seem competent than when things go bad. In a good economic climate decision-makers can take huge risks and if they win they are superstars; if they lose there are generally opportunities to mitigate that loss (either by acquiring debt capital; increasing sales, or raising equity funds just to name a few).

In a bad market we have discovered that THE SAFETY NETS ARE GONE; and risky decisions have real consequences. In this market we are finally paying the price to learn that there is a real difference between corporate sponsored gambling and effective financial management. What we need to do now is train current and future financial decision-makers about what makes an executive financially competent, and what does not. This will produce more effective financial decision-makers and more importantly it will provide a future asset for companies that will assist them in diverse market situations; NOT JUST WHEN TIMES ARE GOOD.

The solution: The following are some of the steps that key decision-makers need to take in order to assist the company in building a more competent and more effective financial management infrastructure.

1) Your executive Finance team: To have a financially competent executive team; YOU NEED A TEAM; there is ALWAYS an inherent danger in leaving major financial decisions to a few individuals. The fact is that we are talking about money; and when that is the subject then many times self interest replaces corporate interest in the decision making hierarchy. Furthermore a company that has a properly chosen team of individuals to make decisions provides a system of checks and balances which mitigate the risks associated with these decisions.

2) Training Courses in Finance: Another conduit would be to get a day or two day workshop in financial training where current decision makers receive tutelage in financial decision making from an application standpoint instead of an academic or theoretical standpoint. Bringing in people that have a history of being competent financial managers will be helpful. But also teaching examples of how poor decisions have destroyed companies would be helpful as well. Many course offer sound coverage of financial topics of importance. However, it is important to check background, experience and credentials of the trainer before embarking on a course.

3) Get a Coach or Corporate Consultant: Coaching at executive level has proven to be popular in many parts of the world. Experts believe that the value an executive coach (whether it is a successful consultant, former executive, or entrepreneur) adds, significantly impacts progression and drives performance to a higher level. There are many coaches available but you need to ensure you get a coach who will listen to your concerns at the same time offer the right and relevant professional advice. With the advent of the internet, organizations also offer virtual coaching support.

4) Have self-analysis meetings: At least once a year all organizations should seek to have a meeting with all people involved in the financial decision making process (executives, senior financial/accounting personnel, board members, etc.) and simply have a brain-storming session that focuses on the direction of the organization; future financial needs, current financial position, etc. These meetings have a way of bringing issues to light that otherwise would stay in the dark; and furthermore you want all of these people to work well with each other, and this is a good platform to start from.

While most organizations believe that the decision making aspect of their financial infrastructure is at least competent; the fact is that many organizations aren’t aware of what constitutes competence as it relates to financial decision making. The fact is that, no matter where your organization is located, the WORLD HAS CHANGED for companies; to stay prosperous companies must focus on sustainability and not luck; they must focus on consistency and not major peaks. Financial competence has little to do with an education in finance, it has everything to do with how your executives can use that information and analyze the health and the future of the organization. Those that understand this are in an advantageous position; those that don’t are playing with fire.

CAUTION: While all the above (and others) may prove useful, the idea is not to micromanage and get bogged in deep financials. Keeping it simple is the message. I believe if boards can set criteria through Executive Policy Development from the onset, keeping it simple yet covering all financials of your organization is the way forward. Subsequent monitoring of the financial health at appropriate intervals will help you shape your organisation’s financial strength further. After all, it is all about accountability at board level.

Free Casino Bonus Credits and Its Essential Rules

Online casino games have been drawing huge crowd and one of the main reasons behind it is the bonuses that the games offer to a player online. Free casino bonus credits are offered to a player from time to time. It is given to a gambler for a number of reasons; may be as an incentive to switch over to playing at real casinos.

Apart from that, this type of credits also helps in drawing new players to the online gambling sites. However, a number of rules are there to getting them. Therefore, it is very important for a player to understand them properly. There are some online casino sites that provide a bonus amount of up to 100.

As soon as a player will sign up with that site, 100 credits will be deposited in his casino account. It may so happen that the player can be asked to deposit an equal sum of money for being one of the conditions of getting the casino bonus credits. After the account opens and the money is transferred, a gambler can start of playing the game.

Other than the above requirement, the players can be asked to wager the whole free casino bonus, which was offered to them before they go ahead to take out money from the online casino account of theirs. This amount of money is needed to be wagered before any withdrawal takes place.

This was so far about opening an account with an online casino gaming site and getting the bonus amount. There is another way where the players after introducing new players through referral program can earn their credit money. It functions in the same way as above.

What the player has to make sure over here is that the referral is entered before the other signs up and opens an account. This is to affirm that the player making the referral will be getting casino bonus credits that he is entitled to. Getting them is surely a matter of extreme fun and excitement.

There are several online casino games available online, which include craps, slots, video poker, roulette, blackjack, etc. The free bonus credits of casino sites are an excellent way of increasing the winning amount. However, before getting started with a game online, one should thoroughly gather knowledge on the game as that increases the chance of winning it.

Know the game first and then get started.

Financial Needs Analysis

Financial Needs Anaysis (FNA) is defined as a process to identify individual financial needs in order to strategise an investment plan that meet such needs and financial goals. Before I go into details about FNA process, let me explain the three broad categories of financial needs;

(i) Accumulation Needs It is defined as a future financial need that one desire to set aside. The motivation to accumulate a sum of money in future include children education, starting a business, property investment, buying a car, retire early or giving to charity.

(ii) Retirement Needs It is defined as financial need that provide fund to support our life after our retirement. When we retire, our pension or social security benefits begin but our earned income ceases. Our working expenses reduce but our leisure and medical expenses increase.

(iii) Protection Needs It is defined as financial obligations that we need to fulfil upon death, disablement, contracting critical illness, loss of or damage to property and/or when a personal liability arises.

Having a general idea about the three main categories of financial needs, let me go through the process of Financial Needs Analysis:

(1) Fact finding –> (2) Identify and quantify financial needs –> (3) Identify investment products that meet financial goals –> (4) Periodical review of financial needs

1. Fact Finding

Gather personal details, employment details, number of dependents, financial information, existing insurance policies, retirement needs, saving goals, objective and investment preference. Personal details such as age, gender, martial status and smoking habits will offer us a preliminary assessment of the types of financial products that will likely suitable for us. Employment status enables us to determine if income protection is needed for high risk job, and the ability to commit long to medium term investment product. The number of dependents will determine the amount of additional financial support. The more dependent we have, the greater the number of years we have to support them, which means we need more life insurance and income protection. Financial information such as monthly income will help to determine the continuing income needed in the event of death, disability or retirement.

Expenditures information will help to determine the level of income needed for the family to survive in the event of premature death of the breadwinners, and to estimate the funds available for investment. Assets and liabilities information helps to determine net worth, which enable us to decide on the amount of funds for investment or to adjust our lifestyles to reduce liabilities. Existing insurance policy will serve as a starting point for any further insurance products. The objectives and investment preferences will help to determine our attitude towards investment risk, which classified into Risk Averter, Cautious, Balanced and Risk Seeker. Retirement needs information enables us to determine the monthly amount in today’s dollar that we and our dependents need to live on retirement. Generally, most singles need about 50% to 60% of their pre-retirement income to maintain same living standard after retirement. The percentage increase to 60% to 70% for married couples with one retiree. Saving goals information helps to determine if the funds earmarked for various financial goals are adequate.

2. Identifying and Quantifying Financial Needs

After we have gathered all the data through facts finding, the next steps of FNA process is to analyse the data to identify and quantify the financial needs. We should pick up weaknesses that can negatively affect the financial objectives. For examples; amount of debts, investment portfolio, existing insurance products, living within means, investment time horizon, liquidity need, children education and risk profiles. Determine which objectives should be given higher priority. Three factors should be considered when analysing objectives:

  • Establish if the objective is short-term or long-term. Short-term objective is more appropriate for retired person who may wish to increase income produced from investment capital. Long-term objective is more suitable for someone who want sufficient fund to send his new-born child to university in future. However, objectives can be both long and short term.
  • Establish if the objective is for the benefit of us or for others, such as dependants. For example, the objective may be passing our estate to our grandchildren in the event of death. Alternatively, the objective may be to retire early.
  • Prioritise the objectives. For example, we may want to invest a second property but to achieve this objective; it may detriment a reasonable income in retirement. It is important to tackle each financial need and uncover those needs that need immediate attention.

Once all the financial needs are identified and prioritised, each need must be quantified. The ways to quantify retirement, protection and accumulation needs are different. There are two methods to quantifying retirement needs, namely the replacement ratio method and expense method. As for protection needs, the method include determine the sum of total liabilities and immediate expenses required at the time of death and the amount needed for dependants as long as needed. Multiple approach and needs approach are two common approach used to quantify the amount needed for dependants. For accumulation needs, the approach is to find the future value of the target amount taking into consideration of inflation. After we have quantified the data, proceed to next step to identify investment products that meet financial objectives.

3. Identify Investment Products that meet Financial Objectives

Points to consider includes investment objectives, product suitability, affordability, taxation, tax relief, rick tolerance, pension schemes, prioritisation and effect of inflation and time value of money. Investment Instrument that meets accumulation and retirement needs includes Money Market Securities, Fixed Income Securities, Equity Investment, Derivative Instruments, Property, Unit Trusts, Whole Life Insurance, Endowment, Investment-Linked Products and Annuities. Investment products that meet protection needs include Term Insurance, Whole Life Insurance, Endowment Insurance, Investment-linked Life Insurance, Riders, Critical illness Insurance, Long Term Care Insurance, Medical Expense Insurance and Managed Healthcare Insurance and Disability Income Insurance. General Insurance products that meet protection needs include Fire Insurance, Household/House owner Insurance, Personal Accident Insurance and Personal Liability Insurance.

4. Periodical Review of Financial Needs

The process of identifying financial needs does not stop with implementation. Our financial needs may change over time. It affects our initial investment plan, as they may no longer be adequate. For example, a steep fall in price of equities would signal that a review of our investment portfolio and saving is required if we invested substantially in equities. Regular review of financial needs ensure we stay on course to our financial goals.

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Poor Credit Rating? Don’t Despair – Help is at Hand

You may have a poor credit report but don’t worry; that doesn’t mean you won’t be able to get credit. The standards for granting credit are not all the same with different creditors. In fact they may differ quite widely. Some look at your whole history. Some, on the other hand, are concerned only with your recent financial dealings and may grant you credit if you are now paying your bills regularly. In fact it might be a good idea for you to get in touch with them informally in order to ascertain what their standards are.

If you lack the necessary discipline to stick t a budget or keep track of your bills and payments you might consider getting in touch with a counseling organization. Many of these are free or low cost non-profit and are there to help people who have similar financial problems as yourself. Remember you are not the only one to run into trouble – if that is any consolation.

However take care, ‘non-profit’ does not necessarily mean that its fees are affordable or even legitimate. Some of these organizations charge high fees,or attempt to hide such fees by pressuring you to make ‘voluntary’ payments. Which, of course, only dumps you with even more debt. Avoid such outfits.

Reputable organizations of this type can help you in managing your financial troubles and help you develop a budget and free educational materials. Their counselors are well versed in all matters of credit, money and debt management in general. You will discuss your financial situation fully with them and, with their expertise, you will hopefully develop a completely personalized to resolve this situation. An initial session of this type will normally last an hour or so with, usually, as many follow-up sessions as may be needed before you have nutted out a promising program.

Do some checking around when looking for assistance of this kind. Many credit counselors offer their services through local offices, by phone, or on the internet. If you can, try and find one that offers in-person counseling. Many universities, military bases, credit unions, housing authorities and branches of the US Co-operative Extension Service have non-profit credit counseling programs. If you are unable to avail yourself of any of these then you could try your financial institution or your local consumer protection agency. Failing all the above, bite the bullet and tell your friends and extended family of your money problems – you might find them to be excellent sources of information and referrals. And, if you get lucky you might just dig out on a branch in your family tree a long forgotten rich uncle with a prosperous sheep station in Australia.

What is Credit Counseling

Credit counseling is professional counseling provided by organizations to help people find ways to pay off their debts. People usually use this as a last recourse when they have serious debt problems. Credit counselors advise their clients by suggesting ways like careful budgeting and management of money. They can also negotiate with creditors to get them waive charges for late payments, extend the term of the loan and lower interest rates.

How do you choose a credit counseling agency? Most of these organizations are non-profit or they charge fees which are affordable. Of course one wouldn’t want to be in further debt by acquiring the services of credit counselors who charge such high fees. Furthermore, you must choose a credit counseling organization that is accredited by a respectable network of credit counseling agencies. Also, do a search on their track record if they have given satisfactory service to their clients. Do not accept offers of those who urge you to make “voluntary contributions” which would add more to your debt.

Besides helping the client develop a budget and manage finances, counselors also offer free educational materials and workshops. They must be certified and trained in the areas of consumer credit, money and debt management and budgeting. Initial counseling lasts an hour and during this time the counselor will discuss the client’s entire financial situation and will provide preliminary steps in developing a financial plan to solve the client’s money problem.

Services of this kind are offered through local offices, the internet or on the phone. It is greatly advised however to discuss financial matters through person-to-person counseling.