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MASTER OF BUSINESS ADMINISTRATION

AWARDED BY NOTTINGHAM TRENT UNIVERSITY

ASSIGNMENT SUBMISSION FORM


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Name of Student: Leong Lai Yin

Student Registration Number: KL102627

Module Name: Managing & Accounting for Financial Resources

Module Number: WEC-MBA-07-1105: MAFR

Assignment Title: Financial Resources Controls

Submission Due Date: 13 December 2009

Student’s Electronic Signature:      

Plagiarism is to be treated seriously. Students caught


plagiarizing, can be expelled from the programme
MAFR Assignment: Prepared by Leong Lai Yin

Contents

Executive Summary Page 2

1. Introduction Page 3

2. Definition of Terms Page 4

3. Background of Tricor Page 6

4. Corporate Planning and Financial Resources Controls Page 7


• Tricor Financial Resouces
 Working Capital Management Strategy
 Credit Control policy
 Account Receivables policy
 Account Payables policy
 Inventory Control policy
 Purchasing policy
 Staff Claims policy
 Budgetary policy
 Tricor’s Strategies in Investment

Conclusion Page 18

References Page 19

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MAFR Assignment: Prepared by Leong Lai Yin

Executive summary

Tricor Services Malaysia Sdn Bhd “Tricor” have been operating more than 30 years
in Malaysia. Tricor provide a broad range of services on setting up companies and
doing business in Malaysia. Our experience in corporate structuring and advisory
functions including company secretarial, share registration, financial and accounting
services, compliance and advisory services, tax advisory and consultancy services,
Labuan offshore services and human resource consulting services.

Financial resources is the most important part in every corporate agenda, with the
current instability of economic, it seems particularly challenging for Tricor. Sharply
because of higher prices of food, oil and other commodities, fluctuation of currency,
tightening credit conditions and plunging stock market prices confront a new era of
unusually difficult challenges.

Tricor has it quality of service and knowledge in the industry and with the centralised
location; it’s allowed the target market for full service ability and a vision of growth
for the company. Tricor realised that recognizes the sustaining growth is not possible
without a focus on financial resources controls and also investment strategy. The
management plans to generate income and capital gains besides only the revenue from
the retainer fees to support the operations.

This financial control provides the basic element framework to the management in
managing the financial resources and optimising growth of Tricor. This report
outlines the development financial strategy in terms of the Corporate Planning and
Financial Resources Controls in rendering the Budgeting and Reporting to the
Working Capital Management Strategy. From this policies and procedures the
management can identify the critical capabilities needed to meet goals within an
acceptable cost structure to maximise growth of the company.

(270 words)

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MAFR Assignment: Prepared by Leong Lai Yin

1. Introduction

What are financial resources and financial resources controls?

Financial resources are the availability of cash, creditors, debtors, securities, loan and
funding infatuated by an organisation. Financial resources are mainly came from
internal and external sources such as the working capital, income earning, retained
earning, sales of goods or services, hire purchase, leasing and others.

A financial resources control is an important tool to an organisation. The financial


resources control is an efficient and effective deployment for any organisation be it
small or big. These processes, technique and controls and methodology help the
organisation to resource the estimating availability of cash or creditors possessed by
the organisation. Financial resources controls are essential components to an
organisation to plan and to execute and also to monitor their operation.

Sometimes lack of focus on financial resources controls is common, especially among


the private limited or smaller operation companies. If the organisation do not create
the capital plans and do not actively manage their working capital, they will not be
able to conduct analysis of the financial statements to get the financial status. The
organisation will fail to reach it financial goals in term of profits.

If an organisation is taking the time and effort to develop the financial resources
controls based on the financial control system, then it seems worth the small amount
of additional of effort it would take to understand the major financial processes of the
organisation. Regularly reviewing and improving the overall working capital structure
it will help to establish the key finance goals and to produce accurate financial
statements to minimise the debt or equity and strengthening the cost of capital. The
controls and processes provide a level of materiality in reaching financial goals and to
maximise the shareholder profits.

(291 words)

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MAFR Assignment: Prepared by Leong Lai Yin

2. Definition of Terms
“Account : Money which is owed to a company by clients for products
Receivables” and services provided on credit. This is treated as a current
asset on a balance sheet.

“Account Payables” : Money which a company owes to vendors for products and
services purchased on credit. This is treated as current
liability on a balance sheet.

“Business Planning” : A formal statement of a set of business goals

“Budgeting” : Establishing a planned level of expenditures, usually at a


fairly detailed level. A company may plan and maintain a
budget on either an accrual or a cash basis.

“CEO” : Chief Executive Officer – The executive who is


responsible for company operations.

“CFO” : Chief Financial Officer - The executive who is responsible


for financial planning and record-keeping for a company.

“Capital Management : Is an area of finance dealing with financial decisions


Strategy “ business enterprises make and the tools and analysis used to
make these decisions.

“Financial Policies” : Criteria describing a corporation's choices regarding its


debt/equity mix, currencies of denomination, maturity
structure, method of financing investment projects, and
hedging decisions with a goal of maximizing the value of
the firm to some set of stockholders.

“Financial : Planning, directing, monitoring, organizing, and


Management” controlling of the monetary resources of an organization.

“Financial Resources” : Resources that are or will become available for spending.

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MAFR Assignment: Prepared by Leong Lai Yin

Financial resources include cash and resources ordinarily


expected to be converted to cash.

“Credit Control : Policies aimed at serving the dual purpose of increasing


Policy” sales revenue by extending credit to customers who are
deemed a good credit risk.

“Investment” : Investing of money or capital in order to gain profitable


returns, as interest, income, or appreciation in value.

“Inventory Control” : Supervision of the supply and storage and accessibility of


items in order to insure an adequate supply without
excessive oversupply

“Purchasing Policy” : Management control point where all significant purchases


are monitored the flow of in put and outputs.

“Reporting” : A formal account of the proceedings or transactions of a


group.

“Management : Process of preparing account that provides accurate and


Accounts” timely key financial and statistical information.

“Management : Senior-level management committee empowered to make


Committee” and implement major organizational decisions.

3. Back ground of Tricor

Tricor Services Malaysia Sdn Bhd “Tricor” have been operating more than 30 years
in Malaysia. Tricor has built its reputation and professional expertise through the
acquisition of certain practices from major accounting and professional firms as well
as through organic growth and development. Most of Tricor key management and

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MAFR Assignment: Prepared by Leong Lai Yin

professional personnel are the former directors and employees of leading accounting
practices. Our head quarter is located in Gardens, Mid Valley, Kuala Lumpur. Tricor
have it offices through out Malaysia where they are in Penang, Ipoh, Melaka and
Johor.

With the strength of our 350 employees, Tricor provide a broad range of services and
our vast experience in regional matters allow us to give expert advice to our clients on
setting up companies and doing business in Malaysia. We are expert in corporate
structuring and advisory functions including company secretarial, share registration,
financial and accounting services, compliance and advisory services, tax advisory and
consultancy services, Labuan offshore services and human resource consulting
services. All this services are valuable outsourcing services administration function to
an organisation or company. Our expertise can help in our clients’ non core activities
such as corporate administration, compliance and business support functions. Tricor
has it proven history of developing strategic long term services through meticulous
attention and professionalism at every service level.

With the 6000 clients’ database, Tricor is the leading management service firm in
Malaysia who clients across a wide range of industries, including Fortune 500
companies, multinationals as well as companies listed in Asia. Outsourcing business
support and corporate compliance functions to our specialist remove the company’s
administrative burden, saves high staff expenditure, provides in-depth knowledge of
intricate rules and regulations, and delivers cost effective and efficient management of
time-sensitive and confidential transactions.

(288 words)

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MAFR Assignment: Prepared by Leong Lai Yin

4. Corporate Planning and Financial Resources Controls

The nature of our business is one in which we are affected by how our clients
perform. We are in essence, an extension of their business, so whatever impacts their
business, impact on Tricor as well. The economic downturn has led to many
companies reassessing their overall business model.

Tricor faces challenges such as termination of services from clients and also difficulty
in collection. Tricor have to remain aggressive and be more cost effective and resilient
during these tough times. We acknowledges its overall responsibility for maintaining
a system of internal controls that provides reasonable assurance of effective and
efficient operations as well as adherence to internal policies and procedures to govern
the financial and operational functions and ethics of Tricor.

4.1 Tricor financial resources:

Tricor financial resources are mainly from the retainer fees from the secretarial
services, business outsourcing and share registration services. As one of our strength
is consultancy and advisory, we do provide such services in contributing additional
revenue to the organisation.

As Tricor is a management firm, our operational cost are based on staff salaries,
utilities bills, rental of premises, stationeries, printing, marketing materials and
business development expenses, payment to suppliers or vendors, hire purchase loans,
insurance, bank overdrafts and etc.

With all this sources the management performs an annual budgeting controls and
forecasting exercise for the development of business strategies and establishment of
key performance indicators within the firm to be evaluated on the financial
performance.

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MAFR Assignment: Prepared by Leong Lai Yin

Financial performance and monthly management accounts will serve as monitoring


tools to be circulated to the key management staff and regularly compared against
budgetary parameters, with explanations of major variances, reviews of internal and
external factors contributing to the organisation performance, and an account of
management actions taken to improve results. Variances against budget are analysed
and reported internally on a monthly basis in Management Committee meetings.

On a quarterly basis, the financial results together with their variances are reported
and reviewed by CEO and CFO to enable them to gauge the firm achievement of its
annual targets and review any key financial and operational issues.

The firm strategic financial resources controls will also be reviewed annually in light
of the prevailing market conditions and significant market risks by the CEO and the
Senior Management of the firm.

Accordingly, Tricor has come up with the following key elements of the controlling
cost framework to be adopted as an on going process to monitor and review the
effectiveness of our system of financial controls to maximise shareholder profits.

Working Capital Management Strategy


We intend to employ appropriate financial policies to optimise risk. We aim to
optimise Tricor capital structure within in proper working capital in getting
accuracy and integrity in financial statements provides management with
information to monitor financial resources and activities.

Credit control policy


Effective credit controls maximises the cash flow and minimises the
risk to Tricor bad debt. The finance department must ensure that all
money which is due and payable to Tricor is collected and for this
purpose, we must adopt, maintain and implement a credit control and
debt collection policy.

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MAFR Assignment: Prepared by Leong Lai Yin

The procedures:

Creditability check – Research on the credit analysis of the potential


clients’ financial background and obtain information to determine
creditworthiness.

Indicate - The amount of service rendered to each client, and to make


sure accurate and timely billing.

Billing – Client are presented invoice of the specific service rendered.

Payment – Client shall make payment according to Tricor term of


payment.

 Account receivables policy

The most challenging tasks of Tricor are actively measuring


revenue and ensure invoicing clients after services has
rendered. In order to recover payment from clients or the past
due accounts, a control of credit standards is implemented as
follows before it become bad debts.

o Operational staff provides billing advice to finance


department to prepare invoice. Finance personnel to
input data to system to prepare invoice. Shorten the
invoicing process to 2 days after receiving from the
operational personnel.
o Reduce billing errors avoiding this delay in error
and time will amount to cash savings. Copy of
billing advice attached together with invoice for
credit control manager for verification.
o Head of department to approved invoice after
verification.
o After approval the invoice will be forwarded to
client immediately. The invoice stating their

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MAFR Assignment: Prepared by Leong Lai Yin

accounts is 30 days before past due, a first reminder


of payment will be forwarded to the client after 30
days and payment must be received within 14 days.
If payment is not make their account maybe subject
to further collection efforts. Document each contact
with the client for future references.
o The second level, after 45 days a second reminder
will be sent to demand payment from the client. A
demand letter will be mail, along with a copy of the
past due invoice, and any other supporting
documentation to the client. State in the letter that
payment must be received within 10 days or the
account will be turned over to collection agency
before legal action take place.
o The final level, do not wait until the account is 1-2
years past due, because as time passes the debt
becomes increasingly difficult to collect. The final
step in the collection process from the collection
agency, the client then has 30 days to dispute the
debt, if after 30 days no dispute is received, the debt
is assumed valid for legal action. Once it is turn to
collection agency, Tricor will ceased all
communications with the client, all documentation
will be handover to collection agency to make their
collection process easier with more information
provide. After all the collection process is utilised
and when all other collection attempts have failed, a
legal action will take place to the client to force
payment of the debt.

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MAFR Assignment: Prepared by Leong Lai Yin

Account Payables policy

Account payables are an important financial cycle in Tricor,


paying on time according to terms of the payables process has
to be structured. In Tricor practices, we always pay on time and
that make Tricor has good credit rating from the suppliers,
banks and vendors. Delayed payment may eventually result
increased prices or reduced service levels. A credit policy has
been set between Tricor and the suppliers, banks and vendors,
this help Tricor to monitor it cash-flow management, fraud
prevention and also cost reduction.

o With our good credit rating from the suppliers,


banks and vendors, they have agreed in a 60 days
term of payment from it previous 30 days. With this
finance department can manage the cash flow of
Tricor. Finance department will ensure the
document must be an invoice and supported with
purchase order and signed by the department
manager of acknowledgement to finance staff for
verification.
o After the finance staff verifies all invoices, CFO
will need final check and approved for payment
according to the supplier or creditor term of
payment. A cheque will be raised for CEO
signatory.
o The finance staff will then classified the expenses
accordingly to office operational expenditure or
client expenditure. As for client expenditure, finance
will then key in the system for future invoicing
purpose.
o The standard cheque processing will be 5 working
days and for rush processing will be 1 working day.

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MAFR Assignment: Prepared by Leong Lai Yin

o After cheque has been signed by CEO, it will be


forwarded to the suppliers or creditors without any
delay.

With the credit control policy in account receivables and


payables monitoring, Tricor income statement results will
shows over a period of time.

 Inventory control policy

Being a service provider, excess inventory is something to be


avoided. It costs money in extra overhead, debt service on loans
to purchase the excess inventory, additional its increased
insurance costs. The following policy will help Tricor to
promote efficiency for inventory control, management and
planning.

o Forecasting and Plan inventory – purchase enough


inventories to satisfy demand from operational use.
Eliminating the carrying of over supply inventories,
it will benefit by increasing cash flow.
o Establish order cycles – Establish a regular ordering
pattern with supplier and consider the costs of
preparing an order include the logistic cost to
minimise expenses. Discuss with supplier to
develop a system tailored to Tricor needs.
o Balance inventory – Optimising inventory will not
cause Tricor in excessive carrying costs and also
satisfied the operational demand, it will also
promote efficiency in balance sheets.

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MAFR Assignment: Prepared by Leong Lai Yin

o Assess the inventory – Follow up and keeping


inventory up to date to avoid obsolete and also
reducing purchasing error. Sell excess and obsolete
inventory or return it to your vendor and eliminate
delivery variance from supplier by providing
suppliers with forecasts of future needs.
o Train purchasing personnel - Provide purchasing
and material management personnel with formal
training. This will arm the purchasing personnel
with better negotiating skills, result in better prices
and terms.

Controlling inventory helps to supervision accessibility and


also reducing carrying or holding on cost.

 Purchasing policy

At Tricor, most purchasing is conducted by the administrative


department personnel. The purchasing activities need proper
transaction documentation and fiscal responsibility. The
purchasing policy and procedures is to provide reasonably
priced, high quality goods and services to staff, while
preserving Tricor and financial and civic accountability and the
procedures are as followed.

o Requester raised purchase requisition form


o Purchase requisition form will be sent to head of
business unit for approval
o Approved purchase requisition form will be sent to
administrative department to raised purchase order
via accounting system.

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MAFR Assignment: Prepared by Leong Lai Yin

o The administrative department are encouraged to


purchase goods and services from preferred
suppliers. The use of non- preferred suppliers for
expenditures above must be documented in
accordance.
o The admin personnel will be provided appropriate
training and documentation.
o Maintain purchasing cards include date of purchase,
expiration dates, and also damages, lost items.
o Establish and maintain qualified preferred supplier
list, analyse the documents, including terms and
conditions, discount pricing, product or service
quality and delivery performance.
o Regularly re-evaluate preferred supplier
performance, price adherence and requestor or staff
satisfaction.
o Maintain financial relationship with bank and the
supplier.
o Affix approval from Administrative Manager after
finalisation of all the quotation to finalise the
purchase.

 Staff Claims Policy

Expenses for employment related benefits include parking


allowances, medical, leave passage and festive advances. The
employment advance includes executive advance float and
employment reimbursements including mileage,
accommodation, entertainment, parking and toll.

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MAFR Assignment: Prepared by Leong Lai Yin

The policy is as followed:

o Staffs complete claim form and attaches relevant


supporting documents.
o Staff submits claim form to head of business unit
verification and approval
o Head of business unit submit approved claim form
to finance department to issued payment.
o Cheque will be sign by CEO or CFO
o Finance will capture the claim in the accounting
system.

Employment reimbursements of expenses above will claim thru


new claim form and staff is responsible for ensuring their
claims does not exceed entitlement or limits. With these
controls, the firm will be able to monitor the operational cost.

 Budgetary control

All organisations need to manage their performance so that


their financial and strategic objectives are achieved. A proper
control of budget is to safeguard Tricor viability and the
effectiveness delivery of its objectives. This requires
comprehensive financial planning processes for both capital
and revenue.

o Establish budgetary control – planning and


forecasting the income and expenditure, covering
capital expenditure and disposal.
o Produce quarterly budget status report for
monitoring purposes.
o Reconcile bank and cash balances and the sources
and applications of funding.
o Establish financial limit of authority

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MAFR Assignment: Prepared by Leong Lai Yin

Monitoring of budgets is essential; it is to verify the


expenditure or income against targets but also to identify the
changing patterns or circumstances that the management may
need corrective action in changing the policy.

 Tricor’s Strategies in Investment Policy

The management are taking the most common organisational


structure for financial management to create wealth for the
business and provide adequate return on investment bearing of
the risks that the business is taking and the resources invested
in the competitive market.

In pursuing this investment strategy, our current intention is to


manage Tricor with the following strategic guidelines;

o The investment committee will monitor and make


decision on the investment. The investment should
be diversifying among a variety of investment
vehicles.
o Protection of the investment portfolio’s principal is
foremost concern with the rising interest rate
unrealised losses will occur and unrealised gain will
transpire during a period of falling interest rates.
o Obtained and objective market prices and
information from verifiable source such as media,
news and etc.
o Clearance of all transactions shall take place on a
delivery versus payment basis.
o The maximum averaged maturity of the investment
portfolio shall not exceed three years.
o Funds shall be invested in short term investment of
less than 60 days, immediate term between one year
or long term investment not more than three years.

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MAFR Assignment: Prepared by Leong Lai Yin

o Tricor may not sell the investment if the sell would


result in capital losses more than 10% of its book
value.
o All deposits of investment shall be insured with a
market value equal or no less than 10% with
accrued interest.
o The sale of each individual investment must be
approved by the investment committee.
o The investment can only be manage by the
authorised financial institution and comply and
agreeing with Tricor investment policy.
o The internal audit will perform an annual
compliance audit of management controls and
adherence to the investment policy.
o The investment committee will prepare a report of
investment transactions and balances of the
investment each quarter.

To maximise shareholder wealth, Tricor has an investment


policy and strategy for internal controls to safeguard Tricor
funds. Each investment transaction shall seek to first ensure the
capital losses avoided. Investment decision should not sustain
unreasonable risk include securities default or wearing down of
market value.

(2,292 words)

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MAFR Assignment: Prepared by Leong Lai Yin

Conclusion

Naturally, all companies follow their own particular strategies for delivering on
their growth agendas and managing costs and risk. Given the challenges, all
organisations can benefit by tailoring their own approach for wealth maximasation
By using the internal and external controls in Tricor will have an impact on the
corporate reputation. Tricor as a leading management firm in Malaysia,
sustainability and growth to maximise shareholder wealth by implementing
controls and policy allows information to be channel to the shareholders to obtain
the informative financial information.

Whatever the ultimate scope, all optimisation controls demands an integrated


measurement plan to ensure the controls processes do not influence corporate
reputation in isolation. Its provide elements of the management reputation about
the direction of where Tricor want to be. The management needs to make
perception and enabling greater success to the organisation in performing well.

As we move into latter stage of the economic cycle, rising interests rates, higher
inflation, and falling stock markets prices are taking a toll on Tricor. Tricor can no
longer rely on the optimistic economy growth with low interest rates and profits.

We have examined the control strategies in the market for inspiration to increase
profitability and controlling cost also deliver quality client satisfaction and
achieve our organisation growth strategy. Each characteristics controls are on the
efficient frontiers which the combination maximise profits for Tricor. The controls
allow the management assess the profit and increases that can be achieved by
implementing it.

(243 words)

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MAFR Assignment: Prepared by Leong Lai Yin

Books/ References

1. Douglas W.Kurz (1992), Policies & Procedures Manual For Accounting and
Financial Control: Aspen Publisher Inc, New York, USA
2. Eugene F. Brigham & Michael C. Ehrhardt (2007), Financial Management:
Theory & Practice, 12th edition, South-Western College Pub, OH, USA
3. Gitman, Lawrence J. (1998), Principles of Managerial Finance, 5th edition,
HarperCollins Publisher.
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summary_fc.cfm
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receivables-procedures.html
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procedures-to-increase-control.html
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20. http://www.unt.edu/policy/UNT_Policy/volume2/11_5.html

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