Financial Projections and Market Development - Free Essay Example

Sample details Pages: 6 Words: 1681 Downloads: 7 Date added: 2017/06/26 Category Economics Essay Type Research paper Did you like this example? CHAPTER 06 6.0 FINANCIAL PROJECTIONS The chapter is outline the financial summery, forecasted financial objectives of the bank by re-launching market development market penetration activities for MB. Consolidated budget allocations for 04 different SBUs have already been discussed in Chapter 05 this chapter makes financial projections for next 03 years. 6.1 Startup Capital Forecasted startup capital of new SBU plan to be financed through bank reserves there will not be any financial cost Involvement on same. Don’t waste time! Our writers will create an original "Financial Projections and Market Development" essay for you Create order Importance of the following schedule is very less Investment on fixed asset requirements. Table No 10 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Startup Capital Software Development IT Infrastructure 250,000 Office equipment Marketing Division 150,000 New office furniture to identified branches 100,000 Working Capital Requirement to conduct the campaign 1,500,000 Total Start up Capital requirement 2,000,000 Bank Funding through reserves 2,000,000 (Source : Authorà ¢Ã¢â€š ¬Ã¢â€ž ¢s work) 6.2. The Master Budget funding issues Author has been identified 04 main SBUs in this business development proposal budget allocations were made according to the business forecast prepared till 2018 (Refer page Nos. 52 to 54 for the master budget prepared for all SBUs). There had been 18 Million Investment already made on MB Infrastructure Implementation process this master budget cost allocations will be an additional cost factor for the bank If it does not compensate In return. Further, MB is cost saving tool where bank will be benefited Indirect ways by curtailing overall cost in the bank therefore bankà ¢Ã¢â€š ¬Ã¢â€ž ¢s finance department has been agreed to reimburse LKR 10/- per mobile banking transaction subject to maximum 12 MB transaction per annum per registration. Example à ¢Ã¢â€š ¬Ã¢â‚¬Å" 2016 Expected new MB registrations= 30,000 Reimbursement Amount= (30,000*12)10/- 2016 cost savings Income= 3,600,000/- MB Income/ profits will be utilized to manage next 03 years market development activities. 6.3 Financial KPIs of NTB Being in a highly regulated Industry banks are supposed to provide Insight of all financial transactions are taking place within the bank. The objective of further making Investment on MB simply to curtail cost attribution by diverting core banking transactions to a digital platform. Author has been identified key financial Indicators to evaluate financial position. Return On Assets Assets Turn Over return on Capital employed Expense turn over ratio 6.4 Financial Statements 6.4.1 Profit Loss Account Amounts in Rs. 000 Profit Loss Account 2016 2017 2018 Notes Income from MB fees commission 4,500 12,555 13,950 Cost saving from diverting counter transactions to MB 3,600 10,044 11,160 Total Income(Subject to 7% Inflation adjustments) 8,100 22,599 25,110 1 Less (Budget allocations among SBUs) Marketing 2,450 2,621 2,804 HR 850 909 972 IT 1,150 1,230 1,316 Branches 850 909 972 (-)Total operational Expenses (Subject to 7% Inflation adjustments) 5,300 5,669 6,064 2 Profit Before Taxation 2,800 16,930 19,046 Taxation(VAT Income Tax) 1,120 6,772 7,618 Profit After Taxation 1,680 10,158 11,428 (Source : Authorà ¢Ã¢â€š ¬Ã¢â€ž ¢s work) Assumptions Income has been determined based on the following schedule (According to forecasted No. of new registrations in page No. 40 number of new MB activations in each year) Assumption made on minimum 12 transactions per annum from new MB registered customer to figure out the cost saving each MB transaction cost savings is calculated at LKR 10/-.Further, the Registration commission of LKR 150/- 10/- per transaction cost savings will remain as same for next 03 years. (Table No 11 à ¢Ã¢â€š ¬Ã¢â‚¬Å" Annual Business Income calculation) Income 2016 2017 2018 No of new registration 30,000 90,000 100,000 30,000*150 90,000*150 100,000*150 Registration fee 4,500,000 13,500,000 15,000,000 (30,000*12)10 (90,000*12)10 (100,000*12)10 Cost saving 3,600,000 10,800,000 12,000,000 Total Income 8,100,000 24,300,000 27,000,000 Annual average Inflation rate will remain as 7% for next 03 years Inflation effect has been calculated in both Income statement the balance sheet prepared for next 03 years SBUs cost allocation wouldnt be changed for next 3 years except for the Inflation effect Bank will not go for borrowings to run this campaign Annual combined tax percentage remains as 40% for all 3 years. Notes of profit Loss Account Income has been determined based on forecasted MB activations stated in page No 40. Direct activation fee, cost savings of LKR 10/- per transaction Inflation effect on forecasted Income has been taken in to account. Master budget cost allocations have been mentioned with the Inflation effect. 6.4.2 Balance Sheet Assets Notes 2016 2017 2018 Cash cash equivalents 1,680 1,158 1,428 Other financial Assets 9,000 10,000 Total Assets 1,680 10,158 11,428 Liabilities Retained earnings 1,680 10,158 11,428 Total Liability 1,680 10,158 11,428 (Source : Authorà ¢Ã¢â€š ¬Ã¢â€ž ¢s work) 6.4.3 Cash Flow Statement Forecasted Cash Flow 2016 2017 2018 Total cash generation from MB commission 4,500,000 12,555,000 13,950,000 Total Expenditures 5,300,000 5,669,000 6,064,000 Net Cash Flow (800,000) 6,886,000 7,886,000 (Source : Authorà ¢Ã¢â€š ¬Ã¢â€ž ¢s work) Only considered Income factor for the cash flow statement is MB registration commission, therefore first year there will be a cash flow issue which needs to be financed through Internal sources(Bank reserves). However 02 year onward there is a positive outlook In term of the cash flow according to the financial Interpretations. 6.5 Breakeven Calculation (Table No 12- Breakeven Calculation) Amounts in LKR Registration fee of MB 150 Average variable cost Involvement on each registration 88 Net contribution per unit 62 Per unit Margin 41% (62/150)*100 Total Fixed cost (As per startup capital) 2,000,000 Breakeven point 32,258 (2,000,000/62) (Source : Authorà ¢Ã¢â€š ¬Ã¢â€ž ¢s work) According to the above table if a branch gets minimum 01 new MB registrations per day total No. of registration in the bank (1* 90 Branches =90) then It will take 358 days (Approx .01 year) to reach the breakeven stage. (32,258 MB new registration/180) 6.6. Financial Ratio Analysis According to the above financial projections key financial trends can be determined in the business. 02nd year onwards there is steady 14.5% growth can be expected In terms of the cash flow. After the launch of aggressive marketing campaign 2016 to 2017 (1st to 2nd year) drastic growth of 180% to be expected In term of the total revenue simultaneously the profit attribution will have significant Improvement with the sharp Increase of MB registrations Since the variable cost will not see a major change 02nd year onward sustainable growth momentum will continue both in revenue profit margins. 6.7 IMPLEMWNTATION CHANGE MANAGEMENT STRATERGY In conclusion, entire analysis of the research data it is a proven fact that the low usage of MB is due to following external internal considerations. External factors Traditional banking practices in the Industry have created some resistance on technological banking Innovations Lack of knowledge confidence over digital banking technology Customer resistance due to security concerns trustworthiness Internal Factors Less priority given by the bank to promote digital solutions especially MB Knowledge gap within the bank on MB solution Less focus poor marketing activities to develop the market The above scenarios have been critically assessed in this proposal recommendations made to Increase the usage of identified product. This proposal will further elaborate the Implementation change management process to develop the market share of NTB MB. All 90 branches will be divided into 6 zones according to the geographical location (District level) business environment. Zone 01 to 03- Colombo Branches Zone 04- Down south Branches Zone 05- Central province branches Zone 06- North East branches The zone managers, Ideally the required candidates from senior management team will be heading each zone act as the In charge of the entire business operation of their respective zones. Zonal managers will directly monitor the growth of MB usage held responsible for the business growth. The proposed market development campaign to be commenced in Jan 2016 across the bank all SBUs will make a combine effort to Increase the MB market capitalization to the expected l evel. KPIs to be prepared for all SBUs especially branch teams will be identified based on their skills to develop the business; required cross selling target should be given to every staff member irrespective of their job function within the branch. Sales Force Effectiveness Campaign on MB (SFE- MB) Standardizing the sales approach across the bank to bring the sales business promotional culture among all branches. The performance dashboard is being set up to monitor daily, weekly monthly business progress of a particular branch, the dash board has a permanent place for each every staff member to record their Individual sales contribution towards the campaign. (Table No 13 : SFE Dashboard) Staff Member No of lead generated for MB No of MB Registrations No of MB Activations Cross selling opportunities on other products (Source- Authorà ¢Ã¢â€š ¬Ã¢â€ž ¢s work) The above format will be drawn on a white board which can be daily updated in fornt of the branch manager during regular morning hurdle. Branch manager needs effectively check the progress of new registrations activations while coaching the branch staff to develop their cross selling abilities. In SFE process branch operational staff (Teller, credit officers, pawning staff) will also be participating Indirectly for the campaign which they considered as à ¢Ã¢â€š ¬Ã…“Lead Generatorsà ¢Ã¢â€š ¬Ã‚  They are suppose to collect minimum of 03 MB leads per day handover them to branch sales unit à ¢Ã¢â€š ¬Ã…“Lead convertorsà ¢Ã¢â€š ¬Ã‚  (customer relationship staff) In case if they are unable to get customerà ¢Ã¢â€š ¬Ã¢â€ž ¢s consent then there to do the registration or activation during first Interaction with the customer. Rewards points distribution among LG LC (Table No 14: Reward points structure) Lead Generation Business Conversions Total reward points Lead generator 25 Points 25 Points 50 Points Lead convertor N/A 25 Points 25 Points (1 RP= LKR 1/) (Source à ¢Ã¢â€š ¬Ã¢â‚¬Å" Authorà ¢Ã¢â€š ¬Ã¢â€ž ¢s work) Apart from the periodical marketing promotions which has been already discussed in this report standard staff rewards scheme would bring the entire team support within the branch on new business acquisitions. In order to develop the sales culture in our branch network especially among operational staff proper internal communication needs to be developed within the organization. While motivating staff through an Incentive scheme the management staff should clearly explain the long term advantage of promoting MB to the staff as well as ultimate benefits for the employees from this Initiatives. Reduce the unnecessary work load to create good work life balance Cost reductions would bring more profitability to the organization which will be beneficial on employees annual benefit review. Enhanced sales skills will crate better career progression to employees Enhanced goodwill market perception of the bank will create mutual benefits to both employees as well as the organization. (i.e. Better recognition, demand comes from competitor banks) 6.7.1 Timescale of the Implementation (Chart No 03 chart on Implementation) Business Development activities 1 2 3 4 5 6 7 8 9 10 11 12 Resource deployment to all SBUs Setting up IT technical support Educating branch sales staff about the campaign Commence Mass Media public awareness campaign Introducing SFE system the performance dash board Official launch of the SFE system MB promotional campaign Drive the campaign First half performance review Review staff customer feedback on MB Monitor review Year end financial progress review Plan ahead on 2nd phase 7.0 Referencing 8.0 Appendices