Scribd
Upload
6 views

Lecture 3

Uploaded by

alifataubadiemah
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
6 views

Lecture 3

Uploaded by

alifataubadiemah
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 26

Lecture 3:

MANAGEMENT OF FACILITIES AND FINANCES


Facility Management definitions

- ‘Facility management is a profession that encompasses


multiple disciplines to ensure functionality of the built
environment by integrating people, place, process and
technology.’(IFMA 1983)

-‘Facilities management involves the management,


operation and maintenance of buildings and community
infrastructure.’ (FMA Australia; British Institute of
Facilities Management )
...What actually is...“Facility management“...
The perception of Facility Management has changed significantly
in the past years to Business Process Management approach

integration of processes within an organisation to maintain and


develop the agreed services which support and improve the
effectiveness of its primary activities (European standard EN 15221)
MANAGEMENT OF FINANCES

• Who needs money?

• Can you or a business survive without cash?

• So what is Finance?

4
Why do we need to manage finances?

Almost half of all new ventures fail because


of poor financial management
-Dun & Brandstreet
5
Personal finance
• Where does money for individuals (personal
finance) come from?:

– Our own money in pocket


– Borrows from friends or credit cards or bank
loans
– Received from Government if entitled to some
benefits
– Earned by doing something or sales of products
and services 6
Business finance
• A business has the same source of money for individuals
e.g.:

– Its own money


– Borrows: from friends, colleagues, banks and lending
institutions
– Received from Government grants. Eg. new in deprived
sectors
– Earned by sales of products and services
– From private individuals & Private companies
– Microloans

7
To obtain funding for a business project

• Determine how much money is needed to


start your company
• Prove to your investor that your company
requires the predetermined amount of money
• Offer incentives, interest, or collateral for the
investor’s contribution
• Make arrangements to pay back the loan

8
financing businesses
• Each type of business can have different ways to
finance itself, so we need to look at types of business
ownerships

– Sole trader – owned by one person

– Partnership – owned by two or more and based on


agreement among them

– Limited company: owned by two or more but


separate in law from people who own and control 9
Internal Sources of Finance and Growth
• ‘Organic growth’ – growth generated through the
development and expansion of the business itself. Can
be achieved through:

• Generating increasing sales – increasing revenue to


impact on overall profit levels

• Use of retained profit – used to reinvest in the business

• Sale of assets – can be a double edged sword – reduces


capacity?
10
External Sources of Finance and Growth

• Long Term

• Short Term

• 'Inorganic Growth‘

11
Long Term
– SHARES - LOANS

• Ordinary Shares • Debentures

• Preference Shares • Bank loans (mortgage)

• Merchant or Investment
• New share issues Banks

• Rights Issue • Government/EU

• Bonus or Scrip Issue • Grants


Short Term
– Bank loans
– Overdraft facilities
– Trade credit
– Factoring
– Invoice discounting
– Leasing

13
Business Growth, External, Short Term
• Factoring is a financial transaction whereby a business
sells its accounts receivable (i.e., invoices) to a third party
(called a factor) at a discount in exchange for immediate
money

• Factoring allows company to raise finance based on the


value of your outstanding invoices.

• Factoring also gives company the opportunity to


outsource your sales ledger operations and to use more
sophisticated credit rating systems.

• Offers 80 – 85% of the total invoice value 14


LEASING
• It is a contract between the leasing company,
the lessor, and the customer (the lessee).

• The leasing company buys and owns the asset


that the lessee requires.

• The customer hires the asset from the leasing


company and pays rental over a pre-determined
period for the use of the asset.

• There are two types of leases: (Finance Leases


&Operating Leases) 15
Finance Leases

• An agreement where the lessor receives lease


payments to cover its ownership costs.

• The lessee is responsible for maintenance,


insurance, and taxes.

• Some finance leases are conditional sales or


hire purchase agreements.
Operating Leases
• The lease will not run for the full life of the asset
and the lessee will not be liable for its full value.

• The lessor or the original manufacturer or


supplier will assume the residual risk.

• This type of lease is normally only used when the


asset has a probable resale value, for instance,
aircraft or vehicles.
'Inorganic Growth'
Acquisitions

• Merger

• Takeover

18
External Sources of Finance

• Long Term – may be paid back after many


years or not at all!

• Short Term – used to cover fluctuations in


cash flow

• ‘Inorganic Growth’ – growth generated by


acquisition 19
Long term (Means?)
• Loans (Represent creditors to the company not owners)

- Bank loans and mortgages – suitable for small to


medium sized firms where property or some other
asset acts as security for the loan

• A mortgage loan is a loan secured by real property


– Merchant or Investment Banks – act on behalf of
clients to organise and underwrite raising finance

20
Long term (Means?)2
–Government/EU – may offer loans
in certain circumstances
• Grants

• Shares (Shareholders are part


owners of a company.
Short Term
• Bank loans – necessity of paying interest on the
payment, repayment periods from 1 year upwards but
generally no longer than 5 or 10 years at most

• Overdraft facilities – the right to be able to withdraw


funds you do not currently have
– Provides flexibility for a firm
– Interest only paid on the amount overdrawn
– Overdraft limit – the maximum amount allowed to
be drawn - the firm does not have to use all of this
limit

22
Short Term
• Trade credit – Careful management of trade
credit can help ease cash flow – usually
between 28 and 90 days to pay
• Factoring – the sale of debt to a specialist firm
who secures payment and charges a
commission for the service.
• Leasing – provides the opportunity to secure
the use of capital without ownership –
effectively a hire agreement
'Inorganic Growth'
• Acquisitions
• The necessity of financing external
inorganic growth
– Merger:
• firms agree to join together – both may
retain some form of identity
– Takeover:
• One firm secures control of the other,
the firm taken over may lose its identity
24
Conclusion
• The perception of Facility Management has
changed significantly in the past years to
Business Process Management approach
hence facility management goes beyond
the physical building /asserts

• Almost half of all new ventures fail because


of poor financial management hence need
for good financial management practices
Conclusion -2

• “To think is easy. To act is hard. But the


hardest thing in the world is to act in
accordance with your thinking.” (Johann
Wolfgang von Goethe)

• Hence a need for proper management of


facilities and finances to achieve desired
results

You might also like