Financial stakeholders

(Originally published on the OUBS Blog)

There are a lot of financial stakeholders and the following could be a good list.

1\. Internal

a) Managers: stewardship (the need to protect the organisation’s

possessions); planning; control; decision making.

b) Employees

c) Owners

2\. External

a) Funding bodies and owners

b) Owners

c) Lenders of money

d) Suppliers of goods and services

e) Customers and clients

f) Governments agencies

g) The general public

The inputs-outputs model is used a lot to describe that managers need to transform resources (inputs) into goods and services (outputs) that result in outcomes (happy customers, profits, satisfied users, and so on). These inputs and outputs all have monetary values.

You can split up inputs into:

1\. Tangible assets (resources you can see and touch)

a) short-term, day to day, e.g. cash, consumables, materials

b) long-term, e.g. equipment, vehicles, land, buildings

2\. Intangible assets (people and know-how)

Internal budgetary information tracks input consumption and output performance for both planning and reporting back. You can use standard planning and feedback budget pro forma.

You also to do external stakeholder accounting which is done through balance sheets, profit statements / profit and loss accounts, cash flow statements. Traditionally the sources for finance for inputs are called liabilities (fixed and current, while current means under a year repayable), and what the business spends money on is called its assets (long term assets = fixed assets; short term assets = current assets).

Balance sheets reveal to stakeholders where the financial resources in an organisation have come from and how they are used at a particular time.

The profit and loss statement is not made up of cash transactions alone (e.g. server only deducted 50% per year). Cash flow statements just record cash in and out.

The profit and loss accounts reveal the difference between income and expenditure, the gross profit and operating profit, how resources were used and what happened to any profit or surplus.

Annual reports provide information explaining organisations’ results and also evidence of the veracity of their financial statements.