Financial Planning & Analysis and Performance Management

619 Pages·2018·11.48 MB·English

by  Jack Alexander

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PRAISEFOR
FINANCIALPLANNING&ANALYSISAND
PERFORMANCEMANAGEMENT
“AcomprehensiveworkonFP&AandPerformanceManagement,covering
fundamental topics through best practices and advanced topics. Terrific
framework for assessing, improving and expanding the contribution of
FP&A. The accompany website, with models and analysis introduced in
thebook,providessubstantialadditionalvaluetofinanceteams.”
JosephHartnett,COOandCFO,EventLink,LLC
“Financial Planning & Analysis and Performance Management is a
must-have reference manual for FP&A and Investor Relations teams.
I found this text extremely helpful, with its useful tools for setting strategy
and its practical guides to implementing process improvements and to
innovating.”
SallyJ.Curley,CEO,CurleyGlobalIR,LLCandformerSenior
(cid:2) VicePresident,InvestorRelations,CardinalHealth,Inc. (cid:2)
“Theconceptsaddressedinthisbookbothchallengedandinspiredourteam
toreassessandidentifythedriversofvalueinourenterprise,toptobottom.
Weareusingtheexamplesandsuggestionscontainedthroughoutthebookto
developasinglepagedashboardthatwillkeepusfocusedonthekeyelements
of our strategic plan, concentrate on the most relevant metrics, and react
quicklytoanyunexpecteddeviationsandopportunities.Thisbookisamust
readandwillserveasagreatresourceforfuturereference.”
PaulMcGowan,Jr.,CPA,CVA,GlobalManagingPartner,MDD
InternationalLTD.
“Using decades of experience as CFO and business consultant, Jack
Alexander offers a practical guide to bridge the gap between planning and
performance.Thetoolsandmodelsinthisbookwillhelpleveragecorporate
assetsandcreateshareholdervalue.”
JenniferBethel,Professor,BabsonCollege
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FINANCIAL
PLANNING & ANALYSIS
AND PERFORMANCE
MANAGEMENT
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Founded in 1807, John Wiley & Sons is the oldest independent publishing
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Foralistofavailabletitles,visitourwebsiteatwww.WileyFinance.com.
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FINANCIAL
PLANNING & ANALYSIS
AND PERFORMANCE
MANAGEMENT
Jack Alexander
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Copyright©2018byJackAlexander.Allrightsreserved.
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ISBN9781119491484(Hardback)
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TomywifeSuzanne,forfourdecadesoflove,support,andfriendship
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CONTENTS
Preface xv
AbouttheWebsite xix
1 FinancialPlanning&AnalysisandBusiness
PerformanceManagement 1
TheProblemwithTraditionalMeasurementSystems 1
ObjectivesofFinancialAnalysisandPerformance
Management 3
PreviewoftheBook 6
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Summary 9
PartOne FundamentalsandKeyFP&ACapabilities
2 FundamentalsofFinance 13
BasicsofAccountingandFinancialStatements 13
FinancialRatiosandIndicators 19
Summary 42
3 KeyAnalyticalToolsandConcepts 43
BasicStatisticalTools 43
TheBusinessModel 59
Summary 69
4 DevelopingPredictiveandAnalyticalModels 71
WhatIsaFinancialModel? 71
Summary 81
Appendix:IllustrativeModel 81
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Contents
5 BuildingAnalyticalCapability 89
FortheIndividual 90
FortheOrganization 94
Summary 108
6 CommunicatingandPresentingFinancial
Information 109
LayingtheFoundationforSuccess 110
DevelopingEffectivePresentationsandReports 117
DeliveringthePresentation 120
DataVisualizationandPresentation:APictureIsWorth
aThousandWords 121
Summary 134
PartTwo PerformanceManagement
7 BusinessPerformanceManagement 137
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WhatIsBusinessPerformanceManagement? 138
DevelopingorEnhancingBPMinanOrganization 144
Summary 155
8 DashboardsandKeyPerformanceIndicators 157
ObjectivesofDashboardsandKeyPerformanceIndicators 157
SelectingAppropriatePerformanceMeasuresandKey
PerformanceIndicators 160
CreatingPerformanceDashboards 166
SampleDashboardsforSelectedIndustries 175
Summary 175
9 InstitutionalizingPerformanceManagement 179
GainingTraction 179
IntegratingBusinessPerformanceManagementwithOther
ManagementProcesses 183
AvoidingCommonMistakes 189
Summary 191
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Contents
10 MeasuringandDrivingWhat’sImportant:
Innovation,Agility,andHumanCapital 193
Innovation 194
MeasuringandDrivingBusinessAgility 204
HumanCapitalManagement 214
HCMDashboard 226
Summary 226
11 TheExternalView:BenchmarkingPerformance
andCompetitiveAnalysis 227
AnalysisofMarkets,Customers,andCompetitors 228
BenchmarkingtoEvaluatePerformance 232
UsingBenchmarkstoSetEnterpriseGoalsforPerformance
andValueCreation 242
Summary 243
PartThree BusinessProjectionsandPlans
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12 BusinessProjectionsandPlans:Introduction
andBestPractices 247
OverviewofBusinessPlanningandProjections 248
BestPracticesinProjectingFutureFinancialResults 252
Summary 266
13 Budgets,OperatingPlans,andForecasts 267
TheBudgetingProcess 267
TheOperatingPlan 272
BusinessForecastsandOutlooks 277
Summary 301
14 Long-TermProjections 303
UniqueChallengesinEstimatingLong-TermPerformance 304
ApplicationsofLong-TermProjections 305
DevelopingLong-TermProjections 307
PresentationofLong-TermProjections 319
Summary 325
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