Poor finance process in manning selvage and lee company’s finance department

However, Manning Selvage & Lee MSL Company- a company that is working in public relations PR industry and its Finance Department in current situation, it can be seen that the firm is exp

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

NGUYỄN THỊ HẢI VÂN

MASTER THESIS

POOR FINANCE PROCESS IN MANNING SELVAGE &

LEE COMPANY’S FINANCE DEPARTMENT

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: DR ĐOÀN ANH TUẤN

Ho Chi Minh City – Year 2020

List of tables 3

Executive summary 4

1 Company overview 5

2 Symptoms 7

2.1 Negative Cash Flow 7

2.2 Decreased Profit Margin 9

2.3 Long collecting period 10

3 Problem identification 11

3.1 Potential problems 11

3.1.2 Lack of standardized financial process 13

3.1.3 Weak collecting function 14

3.2 Validating problems 16

3.2.1 Assistant’s perspective 16

3.2.2 Finance Manager’s perspective 17

3.2.3 Employee’s perspective 17

3.2.4 The importance of main problem 17

4 Cause validation 18

4.1 Potential causes 18

4.1.1 Lack of internal controls 19

4.1.2 Lack of skilled staffs 20

4.1.3 Lack of team cooperation 20

4.1.4 Weak working allocation 20

4.2 Validating causes 21

5 Alternatives solutions 23

5.1 Solution 1: Preparing and controlling the budgeting process 24

5.2 Solution 2: Implement training program to improve company financial status 35

5.3 Solution 3: Apply KPI – rewarding system 38

6 Supporting information 50

References 53

List of figures

Figure 1.MSL Organization Structure 6

Figure 2.Finance – Accounting Department Structure 7

Figure 3.Net Cash Flow of the company 8

Figure 4.Change in net cash of the company 8

Figure 5.Profit Margin of the company 10

Figure 6 Average collection period of the company 11

Figure 7 Overheads RF vs Actual 12

List of diagrams Diagram 1 Initial cause and effect map of Finance Department 16

Diagram 2 Updated cause - effect map of F&A Department 19

Diagram 3 Fish bone analysis diagram of the lack standardized finance function 23

List of tables Table 1.Roles and responsibilities of participants in budgeting plan 27

Table 2.Project management plan for running the budgeting process 30

Table 3.Training program to improve company financial status 38

Table 4.PSC Principles for allocating responsibilities 42

Table 5.PSC example format when allocating and scoring each department 45

Table 6.Example format for cascading: Individual KPI 49

Executive summary

Finance and Accounting has been becoming as a major of concern in the world of paced business To keep advantage competitive, every firm not only needs to keep up with technology but also need to apply modern technology into the real work, utilize the current resource to maximize the profit Hence, finance and accounting function becomes one of the most important components in an organization This function maintains the relations with all parts of the company as well as ensure the operation is always under control at a management team level A solid finance and accounting function will be a strong base for firm in the progress of achieving chosen objectives and optimize future investments However, Manning Selvage & Lee (MSL) Company- a company that is working in public relations (PR) industry and its Finance Department in current situation, it can be seen that the firm is experiencing from long collecting period, poor cash flow management and decreased in profit margin due to the lack of standardized finance function

This research examines the impact of three main causes- weak working allocation, lack if skilled staffs as well as lack of team cooperation These are the cause of some problems including weak overheads management, lack of standardized financial process and weak collecting period In this paper, in-depth interview, literature reviews and historical data are used to figure out effective and efficient solutions for the department

To sum up, this paper defined symptoms and problems to evaluate and assess their importance as well as propose feasible solutions to enhance business performance, solve the current issue, general and improve the profit of the company through increase more inflows Throughout this paper, viewers could have a full picture of relationship between cause and effects well as get familiar with solutions to cope with problems happened in the department

1 Company overview

Founded in 1926, Publicis Groupe is the 3rd largest communications group in the world Through a powerful alchemy of creativity and technology, company are driving business transformation across the entire value chain Highly modular, Publicis Groupe Connecting Company model is a unique platform that gives clients plug and play access to our best-in-class services Supported by a Global Client Leader (GCL), company’s clients benefit from a borderless, seamless service that drives the alchemy of creativity and technology Publicis Groupe is organized into 4 Solutions Hubs for easier connectivity and integration: Publicis Communications, Publicis Sapient, Publicis Media and Publicis Health In this model, all agency brands still exist but share an operational backbone, which gives them the power and expertise of all the Solution Hubs combined to deliver the scale required to compete and win in new world markets As a Connecting Company, firm is able to deliver

as the Power of One - driven by a common purpose, a powerful spirit, shared behaviors, great character and a relentless focus on our clients

Publicis Vienam is established in 2016 with four main agencies including Manning Selvage & Lee (MSL), Publicis Media, Publicis and Leo Burnett that will be in charge

of two mains divisions: Publicis Communications and Publicis Media

The needs of client are the core of the Connecting Company Model

- Clients come first

- We are seamless

- We are frictionless

- We are modular

- We are united

Leading the company is Chief Executive Officer- Mr Lukasz Rosz who will take the management role for total company in Vietnam market There are four shareholders which takes responsibility for four main groups: Finance and Accounting Department, Human Resource Department, Admin (Office) Department, Production Department

Figure 1.MSL Organization Structure

Source: MSL’s internal information

Chief Executive Officer (CEO)

Finance &

Accounting Department

Chief Finance Officer (CFO)

Finance

Manager accountantChief AssisstantFinance

Human Resource Department

Chief Talent Officer HR executives

Admin Department

Office Manager executivesAdmin

Production Department

Digital executives executivesEvent executivesPlanning excutivesAccount

1.3 Mission

Publicis Groupe’s mission is to be the world leader in sustainable value creation through imaginative ideas and connections that build business with empowered people everywhere

Be the preferred creative partner for our clients' marketing transformation

Publicis Group offers two primary value propositions: innovation and brand/status

Figure 2.Finance – Accounting Department Structure

Source: MSL’s internal information

2 Symptoms

Thanks to the interview with finance manager- Mr Minh as well as Ms Hanh- finance assistant, Ms Linh- AR accountant as well as employees at MSL and historical data of the company, there are three symptoms could be listed as following: negative cash flow, decreased profit margin and long collecting period

2.1 Negative Cash Flow

The definition of cash flow is known as the cash and cash-equivalent which will be transferred into and out of an organization’s business In other words, it shows company’s ability to create value for shareholders It will be determined by the ability to generate cash

flows positively or long-term free cash flow will be maximized for the organization Positive cash flow indicates a company enables to settle debts, reinvest in its business, pay money to shareholders, pay expenses to continue to run the business

As the table below, company is facing a problem in managing its cash flow

2017 2018 2019

Figure 3.Net Cash Flow of the company

Figure 4.Change in net cash of the company

Source: MSL Internal information

As the table above, company is facing a problem in managing its cash flow The net cash flow witnessed a fluctuation from 2017 to 2019 that changing from 1398 to negative -4,873 It 2017, company had negative cash flow from operating activities which means that firm could not generate enough cash to cover operating expenses (labors, taxes,.) The situation improved in 2018 but in 2019, the figure continued to drop to negative -1615 mil VND which can be seen as a signal of weak cash flow management In general, it indicates that cash flow was not be concentrated enough which would be one of the reasons why the company often suffers from cash flow shortages There was not sufficient actions to monitor and deep dive analyze in flow as well as the out flow The current way of working for cash flow is mainly focused on when company needs to get funding from regional yearly

Profit margin is one of the commonly used profitability ratios to measure the degree that

a firm or a business activity that can make money It illustrates the percentage sales that has converted into profit In other words, the percentage figure indicates how many unit

of measurement of profit the business has generated for each VND of sale Net profit margin is calculated by dividing sales revenue by net income Net profit margin can been seen as one of the most important indicators when it turns to an organization’s performance By tracking the fluctuation of net profit margin, company could review and assess current practices applied on the firm Net profit margin will be calculated as below

The below line describes the net profit margin of MSL from 2017 to 2019

The table shows that the company had experienced a significant loss in 2020 with negative 8.89% while in 2017 and 2018, it increased to 6.01% and 7.04% positively The reduction could be a result of poor cost management which also means increase company’s expenses while revenue has also witness a fluctuation in the last 3 years As a result, profit margin would be a symptom that needs to be solved properly to avoid future effects on company’s profitability

Average collection period measures the amount of time for a company to receive payments from its clients Company will use this financial figure to analyze as well as take action accordingly to ensure it will have sufficient cash on hand to meet upcoming financial obligations and run the business smoothly

Collection period is really important to firm as it relies on receivables for the company cash flow A lower average collection period indicates that the organization collects payment effectively Therefore, a low average collection period is usually more favorable than higher collection period Average collection period will be calculated as below

Figure 5.Profit Margin of the company

Source:MSL Internal information of Finance Department

According to the chart above, the collection days changed from 30.3 days to 43.4 days from 2017 to 2018 In 2019 there was a high fluctuation which is 67.9 days, increased approximately 24 days compared to 2018 This significant change in this figure could be seen as a signal for weak collecting payments which might come from weak collecting policy, inefficient management plan and ineffective collector Thus, the company may not have enough cash on hand to operate smoothly and meet the expected results Collecting period is considered as a symptom separately with negative cash flow This is because cash flow included trading working capital which equals to current assets minus current liabilities It means that current receivables will be an element of cash flow However, chosen collecting period related to both long-term and short-term receivables and this symptom indicates more about the effectiveness measurement rather than just comparing the historical data Hence, collecting period is a separate symptom in this paper

Figure 7 Overheads RF vs Actual

Source: MSL Internal information of Finance Department

In 2017, the gap between actual and rolling forecast (RF) for overheads was 1% then in

2018, the portion decreased till negative -12% However, in 2019 the percentage of the gap increased to 10% which indicates forecast was not reflect well the overheads cost In

2018 overheads was under forecast while in 2019 the figure was over forecast with 10%

It can be seen that weak overheads management is one of the potential problems

Based on current way of working, Mr Minh also mentioned that the activities related to prepare and manage budget for overheads was not paid attention enough which leads to unexpected incurred costs As a result, it made an impact on overheads budget and performance of the company To be specific, lack of bottom-up activities was not utilized

to prepare and manage budget while agency was always suffered from top-down KPI (key performance indicators) from regional

Weak overheads management also leads to the poor working allocation which brings out working overload and failure of each department budget management This is because overheads budget needs to be aligned with relevant departments such as: human resource (HR), office This activity helps to keep relevant teams keep updated, utilize budget and take action accordingly when cost incurred unexpectedly However, the fact is that finance assistant is not only responsible for verifying documents, coding invoice in system but also preparing forecast There has not yet a standardized process for overheads management as finance assistant does more of paper and manual working rather than dedicating to analyze and foresee overheads related activities In other words, there was not enough time for

employee to do the tasks without proper process for each kind of task As a result, it makes employees feel overload with current scope of work and they fail to follow up with relevant departments to update activities and manage the budget set for each department

Besides, Ms Hanh – finance assistant also mentioned that the current situation is that overheads management is lack of budget allocation process that leads to unstandardized procedure To be more specific, overheads spending information need to be collected from relevant departments, overheads will be then set accordingly to make sure budget is allocated suitably However, currently finance assistant is mainly collecting information through activities from departments when there is an upcoming spending will incur in next

or current month to update to overheads budget while overheads budget management requires actions from both finance and relevant teams from the beginning It is to ensure that company can anticipate the cost incurred during the year and make decision if needed

to maximize the profit and minimize the cost As per proper process, overheads budget is supposed to be allocated suitably to make sure costs are under control after collecting enough information from relevant partners and departments

3.1.2 Lack of standardized financial process

According to current structure of finance department and sharing from Mr Minh, there is

a lack of standardized financial process in the current situation It is a main reason leading

to decreased in profit margin

Based on the chart of account at company, it can be seen that there is a lack of full, solid financial process in the within the company This is because centralized manage which is known as actions by managers only still happens internally and employees are not fully aware of their contributions in the process To be specific, forecasting process has not yet built properly as managers still hold and make decisions without other department’s involvement Moreover, forecasting currently is mostly based on from historical data and updates from relevant team without a specific and clear timeline on collecting information

It happens when costs expected to cut significantly and manager will inform to relevant teams to make decisions on cost reduction It can be seen obviously as one of the weakness

in the operation In addition, as a part of forecasting, managers received targets from regional and translated it into KPIs However, with current practice, there is no

standardized process for forecasting as the current way of working is receiving targets and trying to compromise with the goals whereas is originally supposed to start from bottom-

up and top-down activities The company has not yet applied an accurate way to utilize the current resource and minimize the expense as well as maximize the profitability by forecasting activities It is obviously that firm is trying to keep up with the targets while the current situation has not yet deep dive analyzed There is no a clear guideline or process

on splitting forecast activities into steps to ensure information will be collected from various resources An standardized finance process is to ensure that the outcomes are measured and validated during the collecting and analyzing steps There is also no specific timeline for forecasting activities so forecasting is completed by manager mostly There is not enough contribution and involvement in this process In other words, by current forecasting process, KPIs achieved based on the ideal scenario not the current situation

As a result, unrealistic KPI was set while finance team might not have enough capability

to achieve those targets Therefore, it could not come up with an accurate forecasting which also means cost is overrun It made a significant impact on operating expense (OPEX) that decreased profit margin OPEX is one of the factors that makes profit margin decrease and it illustrates the cost firm spent to maintain the current business and operation Besides, the decrease of sales could also make an impact on profit margin as this is the first element to create profit and loss statement for organization However, due

to the scope and extent of the exploration as well as the solution for current situation, figuring out the feasible and possible solutions that can apply on the business is crucial Moreover, to increase company’s sales it requires more effort and cooperation from company along with the view from board of management team from regional Therefore, with data resource and current sharing from shareholders at MSL, OPEX would be an aspect that can be taken into consideration

3.1.3 Weak collecting function

Based on the above analysis of collection period, it can be seen that in 2018 the collection days increased 13 days compared with 30 days in 2017 The figure suddenly jumped to approximately 68 days in 2019 Thus, weak collecting function is listed as one of potential problems

As Sharing from Mr Minh, collecting payments from clients is a problem to the company

as it is a link between business operation and agency performance Account receivables is mainly affected by collecting status Moreover, there is still an unstandardized procedure for account receivable function currently To be specific, collector is only follow up with clients at the end of the month or quarter while this activity is supposed to be executed based on payment terms with each client This explained why there is an unstandardized collecting activity In addition, collector will also be in charge of purchasing stationery, equipment for company besides update and follow up with clients Ms Hanh also said that the working allocation is also an issue of company While reviewing and following up with client payment, accountant also needs to verify and check quotation from suppliers

as a part of purchasing role This multiple roles requires accountant both to update client payment status in a timely manner and make sure equipment ordered and purchased according to company demands Multitasking could be become a factor affects performance of employees This is because it increases stress and if employees suffered from a high level of stress, it could turn out as a potential of burnout In other words, it reduces employee’s productivity (Otto, Wahl, Lefort, Frei,(2012)) Research in cognitive science and human factors sees multitasking as having negative consequences (such as producing a slow-down in performance of a principal task and increased errors)" (Spink, A., Cole, C., & Waller, M (2008)) As a consequence, employees feels overloaded with the duties together with unstandardized collecting procedures make firm fail to follow up with customers leading to a long collecting period This is because collecting activities is relevant to organization’s cash flow It directly influenced to trade working capital which made a negative impact on cash flow

The potential problems mention in this part displays as diagram 1

Diagram 1 Initial cause and effect map of Finance Department

Potential problems mentioned in part 3.1 will be validated from three perspectives which are: finance assistant, finance manager and employees Interviews are conducted to get more information from finance assistant, finance manager to collect more data to validate problems The interview content will focus on some aspects which bringing more insights into the current situation of the company The key questions will focus on Finance Department’s working performance, interviewee’s ideas about the current job at the company as well as current practice for some tasks at the department Interview transcript

is disclosed in appendices To validate problem, this part including literatures which is the base before going to cause validation steps

3.2.1 Assistant’s perspective

As Ms Hanh mentioned that company’s financial performance fluctuated unforeseeably due to some reasons Firstly, the role for finance and accountant has not been separated yet while workload for employee has been increasing This created not only workload for employee but also an impact on job efficiency Moreover, Ms Hanh is currently in charge

of overheads budget which become a concern of major recently and she needs to schedule more meeting with all departments before allocating budget for each ones Ms Hanh also shared that while working with the budget, she got some ideas to simplify templates and

process However, with the current situation, Ms Hanh could not have enough time to do propose and execute initiatives on the way of working

3.2.2 Finance Manager’s perspective

Mr Minh shared stated that the problems MSL facing is coming from the lack of standardized financial process which needs to be solved In terms of negative cash flow, it can be seen that there was not sufficient analysis to improve the current situation but time spent on cash flow report when company would need to submit funding request This is because Mr Minh needs to supervise transactions and financing related activities at the same time so he did not have enough time to deep dive analyze on the cash flow report Moreover, he usually suffers from over-optimistic KPIs that makes a significant impact on company’s performance Above all, there should have a standardized financial process in which both have bottom-up activities from leaders and top-down activities from relevant departments This is to ensure that all concerns is captured and company’s target is communicated effectively to each department through visible actions It also means that KPIs needs to be discussed frequently to ensure that crucial goals will be transformed to effective actions

3.2.3 Employee’s perspective

Ms Linh shared that as a receivable accountant, she is now handling purchasing for total company when the firm needs to have equipment or laptops and even insurance This takes her a lot of time for finding, verifying and placing orders as well as tracking orders status

as required from relevant teams While her main task is about following client payment status and following up with client on payment schedule This can be the reason why employees tend to feel overwhelmed with the current job as they are doing irrelevant tasks

at the same time

3.2.4 The importance of main problem

One of the most important functions in an organization is the finance function (Favaro, 2001;Kraan, 2017).The standardized financial process is expected as a model which enables finance to take responsibilities in establish company budget, forecast, control as well as analyze financial information to ensure that Finance Department run smoothly and

make decision in a timely manner In other words, the more standardized the financial process is, the more effective company run The lack of standardized process, weak overheads management and weak collecting function will lead to the symptoms of poor cash flow management, long collecting period and decreased in profit margin A standardized financial process will not only enables finance team to work more effectively

on budget management but also create a good connection between Finance Department with other departments in the progress of together contributing to the business objectives This allows finance department to integrate while empowering team members to take controls while they trying to improve the current processes According to D.Arcy and Mark (1996), good finance department is not only achieving a reduction in the overall costs of finance and accounting but are also help to increase the customers perception Finance department is therefore moving forward to a new definition of finance business partner It is not only focus on transaction processing and reporting but also bring the value

to company by providing values services to customers To turn the current situation for the better, finance process needs to apply the concept of transformation which is considered

as “focuses on improving performance, stewardship and control of the company by enabling chief financial officers and their finance organizations to have greater impact on strategy formulation and execution across the enterprise” (Ehrenhalt, Koudal, Chaudhuri, and Rao (2008, p 37) As a result, finance process needs to utilize capabilities to achieve company goals with efficient and effective operations while providing high quality financial information for management to become a high-performance finance function To sum up, figuring out reasons to solve issues related to the lack of proper financial process

to utilize the current resources as well as enhance team’s effectiveness becomes important

to boost the performance of Finance Department

4 Cause validation

4.1 Potential causes

Based on the previous analysis and literature review, there are some causes of the main problems will be described as below updated cause-effect map of the department

Diagram 2 Updated cause - effect map of F&A Department

4.1.1 Lack of internal controls

Committee of Sponsoring Organizations of the Treadway Commission (COSO, 2013)

stated that internal control is considered as “a process, effected by an entity’s board of

directors, management, and other personnel, designed to provide reasonable assurance

regarding the achievement of objectives relating to operations, reporting, and compliance”

Konrath (2002) mentioned that internal controls was the process that would be effected by

management, board of directors who will design it He figured out that it is to ensure that

firm could provide acceptable assurance relating to the achievement of some objectives

They are (a) Perating control-the controls that related to the effective and efficient use of

the firm’s resources; (b) financial reporting controls – which can be considered as the

reliability of published financial statements preparation; and (c) compliance controls-

which is related to organization’s compliance with current business laws and regulations

Kinney Jr.(2002) mentioned that internal controls research including a wide range of

general business, accounting and auditing It used to measure operating efficiency and

effectiveness, information relevance and risk assessment The purpose of control activities

is to produce and use financial information to inform, monitor and instigate operational

action to meet objectives of organization It may involve a range of activities to ensure that

controls operate as designed It also means that the lack of internal controls might lead to

the failure of managing organizational risks including people-related risk, reporting and

communication risk, asset security and regulatory risk

4.1.2 Lack of skilled staffs

The skills of staff play a major part in determining the effectiveness of finance departments Quinn (2007) suggested that individual performance is affected by factors such as the individual ability in the form of knowledge and skills they had It also means that unskilled staff will not perform well compared with skilled ones who are expected to deliver the good result to assigned tasks For example, when manager assigns task for an employee who will need to submit document to create a new supplier code in system but the employee has no experience on the system and has never worked in ERP system before This can lead to the delayed task completion and will affect other team’s progress as this code will be the source for account team to submit contract and quotation to do a project

4.1.3 Lack of team cooperation

Team cooperation encourages people to make an effort among team members and enhances individual performance (Wang, Yen, & Huang, 2011) Moreover, Wang et al (2011) also stated that cooperation made a positive impact on the job performance Collaborative social skills has becoming as a major of concern as it has been creating more value for employees and getting valued by employers (OECD, 2015) In other words, cooperation and the encouragement of participation in different kinds of labor, social organizations are being considered as the main productive element to create a good teams and workgroups Team cooperation is therefore becoming a competency increasingly in the demand for any business It enables firm to deliver the result more effectively and efficiently

4.1.4 Weak working allocation

Task assignment is usually know as a difficult task as it may reduce efficiency due to lack

of job satisfaction and absenteeism Tasks are supposed to assign to employees to optimize the current resource and minimize the workload However, allocating tasks might put pressure on employees as it could make them feel overloaded with the additional jobs Since it creates workload which is considered as one of the major factors that affects the employees’ productivity and efficiency Workload is defined as the number of tasks being completed by a group or a person in a given period of time and under the normal situations

(Carlson, 2003) According to Carlson (2003), work overload is split into quantitative and qualitative overload Getting too much things to do could be seen as quantitative overload while qualitative work overload is known as “things are too difficult to do” As a result, when employees feel too overwhelmed as they have too much tasks to do and not enough time to handle all the assigned jobs, that case is called work overload Garg (2010) stated that job or job stress is an outcome of mismatch between the individual capabilities and organizational requirements In addition, Meneze (2005) also mentioned that rising job stress has been becoming a challenge for the employers and the more higher level of job stress, the lower productivity employee will deliver Dar, Akmal, Naseem, and din Khan (2011) also found out that job stress will reduce performance of employees significantly

4.2 Validating causes

Based on the above analysis and in-depth interview, finance manager and finance assistance of MSL company declared that the obvious impact of standardized financial process besides other elements such as skilled staffs, weak working allocation and team cooperation There are three main causes leading to the current situation of financial process at finance department which are lack of skilled staffs, lack of team cooperation and weak working allocation

As for lack of skilled staffs, Mr Minh stated that due to the restructuring of total company and the resignation of experienced employees who handle job more than 3 years, MSL now is experiencing the storage of skilled employees Besides, MSL business requires employees needs to get familiar with not only papers but also keep track of project progression and client additional projects Company tried to look for creative and dynamic interns who will get involved into the real job through 3 months but interns did not have enough interests and efforts to stay with the firm In addition, company is still facing with the cash shortage so recruiting experienced employees will be considered and analyzed carefully in current situation Based on the analyzed information from the interviews and above validation, the final cause-and-effect map will be illustrated as Diagram 3

For the lack of team cooperation, Mr Minh claimed that current way of working is that each team mainly inform incurred costs after getting approval from head of departments without discussing about the costs beforehand with finance department To be precise,

general and administration cost usually such as buying new furniture payment sent to finance team while team is sometimes not aware of this cost in the capital expenditure budget Mr Minh also shared that the cost incurred could not be started only from one side,

it supposes to be start from two sides This means communication between finance and relevant team needs to keep updated on the cost incurred in any activities In other words, finance should be aware of any cost incurred in the business to ensure that cost are under control and relevant teams also take their responsibilities in saving costs for the company Finally, for the weak working allocation, Ms Hanh provided more information related to management and operation As a finance assistance, Ms Hanh will be both in charge of coding invoices into system as well as manage the overheads budget for total company From the point of view of finance officer, Ms Hanh shares some solutions which can be considered to apply to solve the current case In a long term, it could help to contribute to shape the business into a clearer and more efficient way In addition, Ms Phuong- AR accountant also claimed that the roles for AR account should be distinguished with the role

of merchandiser as currently, she is handling two tasks at the same time which means she needs to focus on both checking on client’s payment status and verifying supplier for every purchase for office requirements However, verifying and finalizing quotation should be done by a merchandiser instead of overheads finance assistant With more than 50 clients needed to getting payment status, it is clearly a pressure for AR accountant to follow with the assigned scope of work

Through analysis and literature review, a fish bone diagram will be illustrated as below

Diagram 3 Fish bone analysis diagram of the lack standardized finance function

It is obvious that those validated causes are the reasons for the serious problem “Lack

of standardized financial process” Therefore, various solutions and appropriate actions must be proposed to cope with the causes of the key problem Therefore, to improve the current situation as well as the overall profit, identifying a proper and feasible solution to meet the requirements of Finance Department is really important To do so, all employees needs to take into consideration of together finding out the possible methods to increase company profit in general and department work flow

To be precise, current department structure is disorganized without standardized financial function, lack of skilled staffs as well as lack of team cooperation Therefore,

to cope with those factors, it is essential to apply budgeting process to manage the not only overheads budget but also take control in managing company budget The preparation of budgeting process could be seen as the first proactive solution for finance department in the progress of transformation In addition, it is also necessary to utilize the training program for employees and start to apply KPI - rewarding system to assess and control the company financial status

5.1 Solution 1: Preparing and controlling the budgeting process

Budgets are known as an importance tool for short-term planning and control within organization (Anthony et al 2007; Otley 1999) According to Tracy (2008), budgeting process is defined as an activity that including development, implementation and plan’s evaluation for firm’s financial resources during a given period to achieve financial target Budgeting process provides a chance for organization to plan for increased revenue, profit and also being a means to execute a strategic or company’s business plan (Eagle, 2010) Budgeting process is set to solve issues related to financial process

Although budgeting process is essential method, some companies do not really take into account its importance when it comes to manage and control income and expenses, keeping business to run on the right track, making decision for each investment as well as spending Budgeting process can be seen as a combination of a wide range of data for analysis, standardization and decision-making For example, it will take advantages of historical data and business working conditions to help the company to address its strengths and weaknesses, threats and opportunities in financial aspects In addition, regarding to the purpose of solving uncertainty, a proper and solid financial process will support in the cash-flow management process, capex forecasting, scenario planning and capital budgeting for restructuring the company, utilize potential capabilities, minimize business risks and make an appropriate financial investment

In the current case of MSL, the company might experience various difficulties when executing this method as inaccurate data having made impacts on company’s decision-making and time-consuming for employees to follow, apply and get familiar with the plan However, with the proper plan and compromised actions, the benefits still outweigh drawbacks Once the company can go over challenges and get stable in its position, achieving organizational goals could be possible In the advertising industry that company

is currently working on, it is therefore better to improve the Finance Function with budgeting process to avoid unexpected symptoms incurred affecting the results of the firm According to Mr Minh, current budgeting process should be reviewed and re-built to avoid over-spending not only in overheads but also in other cost items which directly or indrectly impacted to company profit This also to make sure that the process will be supervised and updated properly and in a timely manner Besides, re-allocating job for receivables

accountant and finance assistant should be taken into action to reduce the workload as well

as ensure the employee can dedicate to their current scope of work and work more effectively

Budgeting process can be split into process with six steps as following

Step 1: Re-engineering the financial and accounting system

In this step, the company will restructure the financial and accounting system by classifying company current business into two main business units including Creative Projects and Media Project By splitting by business unit, company can have a full picture

on how product break down looks like Creative project is project related to production, public relation, designing projects Media project will be the one that company takes the role as agency for airing products on online and social platforms Based on the given business units, a mutual format for budgeting process will be formed as a appropriate guidance for all departments to follow

A Building up the project chart

Before starting to run the budgeting process, it is necessary to illustrate a project chart to summarize all participants and their key responsibilities in the process This is because this step will help company to identify who will be in charged and support to manage the budget The below figure shows that while CEO is the project owner of the company but the main person who will take responsibility of managing all activities is project leader- CFO Nevertheless, to complete the project, other departments should attend and get involved in some specific aspects For instance, production executives, planning team, event team will support by providing their results, quotations with the assist of account employees Moreover, general accountant will need to ensure to deliver the outcome and qualified reports for any transactions incurred in the organization The chief accountant together with finance manager will work under the direction of CFO For more details, the detailed responsibilities and scope of work of each team in the table will be reflected in Figure below

Figure 8 Project chart to run the budgeting process

Roles and Responsibilities

-Direct total company to work under the the strategy of firm

- Review and establish necessary company policies to support the project

- Support Project Leaders in making-decision and solving problem during the process

- Identify potential changes to cope with them on time

Mr Liem

Assistant All the

meetings, workshop, training

- Collect and update information

- Connect and transfer information between CEO and CFO

- Summarize all working materials

- Instruct and supervise the executives

Ms Hanh Finance Assistant

Project

Leader

All the meetings, workshop, training

- Define and manage project objectives

- Work with CEO to create mission, vision and strategy for the project

- Plan, arrange and allocate resource for the project

- Manage, keep track and control all aspect of the project

- Supervise and support all departments

- Control strategy execution and implementation to ensure to deliver the outcomes as planned

- Report status to CEO

Mr Lam

- Make adjustment, decision, reporting in management if necessary

Supporting

team

All the meetings, workshop, training

- Establish the budget for two main business units based on the direction of Project Leader

- Consolidate data for input

- Collect all relevant documents and records in accordance with the regulations

- Identify and propose potential changes and actions accordingly

- Report issues affected to project outcome and quality

Production Team Admin Team

HR Team

Main Team All the

meetings, workshop, training

- Collect and consolidate data from Supporting Team to create the process

- Evaluation Project’s activities

- Record and keep track on compliance and non-compliance activities

- Report issues affected to project outcome and quality to Project Leader

- Transfer information for supporting team and Project Leader if necessary

Mr Minh- Finance Manager

Mr Huong – Chief accountant

Table 1.Roles and responsibilities of participants in budgeting plan

B Establishing the project management as an action plan

In this part, the company will need to establish a project management plan to monitor, execute and keep all activities under control every stage of the project This project will begin on the first day of 2021 and last approximately for 20 weeks including two stages: setting up strategy and controlling the cash flow To be specific, in stage one, it will start from Jan 1st 2021 and extend to March 1st ( 12 weeks in total) In this phase, CFO, Finance Manager and Chief accountant with the support of assistant and executives will work and complete the bottom-up data before finalizing top-down decisions For examples, main team will prepare business objective according to financial aspects, keep track and control revenue and costs provided by supporting team Main team will also check all the finalized assets and liabilities target in order to present to higher manager for decision making to comply with the requirements After that, in stage two, team member will take action to accomplish the project goals Higher level of managers will review and finalize the process, check on forecast outcomes as well as double check on the final overall performance in the purpose of ensuring that all issues related to budgeting solution will be resolved The details for building project management plan will be shown as below

PROJECT MANAGEMENT PLAN (START – January, 2021)

to

Related document

Expected results

Start day

End day

No

of days

WEEK 1-12: SET UP THE BUSINESS OBJECTIVES AND STRATEGIC TARGETS

1 Prepare the business

plan by individual

business team

Finance Manager, Chief Accountant

Planning based on the budget of each team comfirmation

1/1 15/1 15 Not

started

2

Control the progress

Data reasonable notes for

revenue and expenses of

estimated activities of

Production and Admin,

HR Team

Chief Accountant

Accounting software, reporting system, excel files

Revenue and expenses analysis is submitted

Accounting software, reporting system, excel files

Access to the all the features in software system, and be used until the end of the deployment project

1/1 31/1 31 Not

started

4

Check the assets,

liabilities including AR,

AP, loans, fixed assets,

etc Finalize target ending

balance

Chief Accountant

to check all assets and liabilities

Property form

Property document and financial statement

1/2 15/2 15 Not

started

5

Set up the P&L for

BUs and total

company

Chief Accountant

Excel file in the form for

each project / contract / product

Excel file with revenue and costs

16/2 28/2 13 Not

started

6

Present to the CEO with

the results of each Teams'

financial performance =>

Top- down decision

Chief Accountant &

CFO

Assistant &

Executives

Based on the financial parameters obtained according

to the performance results,

and estimates submitted by Teams, Board of Directors finalizes sales for Production Team / (Top-down process)

The excel file has assumptions for each project / contract / product

Finalize business goals for each Teams

complete items in AR, AP,

loans, fixed assets

Chief Accountant

& CFO Assistant &

Executives

Build , update required information into Excel Program

Combining accounting software and excel file Dashboard and Assumptions

adds actual financial

figures to compare with

estimated data

Chief Accountant

Extract on accounting software to match with Excel

Outcomes on the Dashboard compared with excel file and accounting system

16/4 30/4 15 Not

started

9

Review the AR, AP,

calculate the number of

days till the end of the

year, Review fixed assets

Chief Accountant

Extract on accounting software to match with Excel

Outcomes on the Dashboard compared with excel file and accounting system 16/4 30/04 15

Not started

10

Re-input the number of

days and re-run data to

get the Dashboard

Chief Accountant

Extract on accounting software to match with Excel

Outcomes on the Dashboard compared with excel file and accounting system

1/5 15/5 15

Not started

11

Browse and transfer the

Finance, Accounting, and

Budgetary Module

Chief Accountant

Extract on accounting software to match with Excel

Outcomes on the Dashboard compared with excel file and accounting system

1/5 15/5 15

Not started

12

Detail all the accounts in

the Accounting Software

based on each team

Chief Accountant

Outcomes on the Dashboard compared with excel file and accounting system

1/5 15/5 15

Not started

13

Review the performance of

Finance & Accounting

Department on how to set

up and use

Dashboard for

budgeting process

Chief Accountant

objectives

The new organizational structure of the Financial Accounting Department is able to account the daily figures and use the Dashboard

15/5 31/5 16

Not started

15/5 31/5 16

Not started

Table 2.Project management plan for running the budgeting process

C Design the overall process to control all the activities and operations

Part C will design an overall process while applying the budgeting process to ensure that all activities are under control and there will have actions to take action accordingly when problems occurs in the organization This part included all related steps starting from establishing the budget to finalizing company dashboard

Step 2: Collecting bottom-up data

Developing and building budgeting process will be a challenge as needs to be realistic and feasible Therefore, it should start from “top-down” and “bottom-up” activities This step will be prepared for collecting bottom-up data The bottom-up approach related to identifying the underlying costs and revenue for each department or segment of an organization In MSL case, detailed plan for this model has not yet executed in the company Thus, the format for applying this model will be created The format is based

on the monthly profit or loss structure set for each business unit It is really important to forecast profit or loss based on two main BUs including Creative project and Media project For instance, the below figure will show the format for 2021 to input bottom-up data

Figure 9.Format for bottom-up budgeting - SBU 1 - advertising project

Step 3: Profit and Loss (P&L) calculation

This step is the calculation step which supported CFO in evaluating on project’s profitability It can be seen that total P&L is a total of profit, costs, tax, interests, as well

as EBIT (earning before interest and tax),EAT (earning after tax) which needs to be list out