(In 1965, when this policy letter was originally written, it was the Advisory Council’s hat to do financial planning. At that time the Advisory Council consisted of the senior executives of the org. Later, with the introduction of the seven div org board, what was the Advisory Council became the Exec Council and the Div Heads Council took on the name of Advisory Council. With the introduction of this change, some staff mistakenly thought that the final org responsibility for financial planning became the territory of the div heads which would, of course, be impossible as it is the Exec Council who are held responsible for the solvency of the org as is clearly expressed in HCO PL 21 Dec. 1966, Issue II, EXECUTIVE COUNCIL. The real datum is that the Exec Council is responsible for financial planning and acts on the advices of the Ad Council and in turn the Ad Council gets advised by the heads of departments.
Therefore, this HCO PL has been updated to reflect the changes which have occurred since the original issue, including the role of the FBO in relation to financial planning.)(References:
Financial planning means: how to handle the money and assets of an org so as to maintain outgo below income.
The financial planning hat, in the final analysis, is worn by the Executive Council, as theirs is the responsibility for the successful conduct of the org as a whole.
In this, it is assisted by the Advisory Council, whose responsibility is to assist the Executive Council in planning for the solvency of the org and to propose to the Exec Council sane and prosurvival handlings for its income and assets. The Ad Council, in turn, is advised by the heads of the departments.
Once the Exec Council has reviewed and approved the financial planning, it is then forwarded to the FBO for approval of the allocation. Final authority for the
allocation is the hat of the FBO and he may approve it as proposed, lower it or raise it in accordance with the policies issued in the Finance Series to ensure that his allocation will result in increased income and production. In exercising this authority the FBO may override the proposal of the Exec Council and his decision is final. Where an Exec Council is seen to be properly wearing its financial planning hat and is getting the required income and production expected from the org, the FBO would simply verify this for himself and verify that the allocation requested is correct and then transfer to the org the approved allocation.
The actions of financial planning are as follows:
1. Income planning. This is planning which forces in marketing, promotion, sales and delivery which will result in income.
It is the first step in the sequence as income must be made before it can be spent.
2. Ensuring that Financial Planning Program No. 1 is done for the org and maintained. (Ref: HCO PL 28 October 1982, FINANCIAL PLANNING PROGRAM NO. 1.)
3. Directing the outlay of funds necessary to execute its planning, in alignment with HCO PL 19 Mar. 71R, Issue II, Finance Series 7RA, BEAN THEORY — FINANCE AS A COMMODITY.
4. Directing the payment of bills.
5. Directing any necessary delay in the payment of certain bills.
6. Handling finances in accordance with “dateline paying” as covered in an early policy letter.
7. Setting limits on the purchase orders that may be signed.
8. Preventing divisions or departments in Emergency from buying any but essential promotional supplies or postage.
9. Adjusting payrolls.
10. Setting limits on pay, overtime or bonuses and all authorizations for pay, overtime or bonuses.
11. Reviewing prices, to ensure all the org’s services are priced and priced properly and where any adjustments are needed, getting authorization for such from top management. (Prices may not be set locally in orgs without top management authorization.)
12. Directing any transfers of funds.
13. Deciding upon any large purchases.
14. Authorizing the sale of any equipment or property.
15. Passing upon prices offered for any equipment or property.
Any matter affecting the financial health of the organization has to be passed upon or planned by the Executive Council and authorized by the FBO.
While overall financial planning for the solvency of the org must exist in medium- range form, as in Financial Planning Program No. 1 and in other longer range programs which align with any strategic planning for the org, the immediate handling
of the org’s income and assets is done on a weekly basis.
The weekly financial planning is taken up each Thursday night after the week’s end and is a vital part of the Executive Council meeting for that week. From the Executive Council the completed FP goes to the FBO for his final approval.
Thus the three major summaries which have always been required for standard FP (the Monthly Bills Summary, Monthly Accounts Summary and Income Note Collections Summary) are still required and made up in monthly format, but they must also be updated weekly for the weekly FP.
The Disbursement Section furnishes the data without which financial planning is impossible.
A short summary of the data required for financial planning is as follows:
The Disbursement Section files every bill received in the disbursement files. It also files every purchase order in these files (once the purchase has been made). (Ref: HCO PL 2 Mar. 65, PURCHASE ORDER FILING.)
Those bills that are repetitive and purchase orders that are for materials from companies from whom goods or services are ordered regularly are filed in folders under the company name. The one-time bills and the one-time purchase orders are filed in a loose folder for a single month.
The Disbursement Section has made up a mimeographed form. This is the Monthly Bills Summary.
This form has the name of each company with which the org does business plus adequate blanks after each alphabet letter for new companies to be added.
This form has four columns. The first column is the company owed. The second column is the grand total of money owed that company. The third column is the amount that is past due. The fourth column is the month since when the bill has been past due.
All bills are filed on arrival. They are not kept out and entered. They are filed in the folders. This is important. No one must pay bills just taken from the post [mail] and saved up. They are promptly filed.
Then one takes the folders one by one and makes up the Monthly Bills Summary. As each folder is taken up, the bills are examined for correctness, straightened up and entered in the Monthly Bills Summary. Purchase orders where the purchase has been made but no statement has yet come in must also be filed and entered on the Monthly Bills Summary as, statement or no, this money is owed.
The way the system breaks down is to make up too many folders.
Only a repeating creditor rates a folder. One the org does business with routinely like the light company, the landlord, the paper company, etc. The occasional bills and the activated purchase orders for the occasional creditor go into the occasional bills folder for the month.
Each time a Monthly Bills Summary is made up, the occasional folders for past months containing unpaid bills and used but not-yet-paid-for purchase orders are gone through again and added to the statement.
The statement for one month complete, then tells one the total monies owed by the org for that month. Thus there is a statement for each month.
While this is made up and used in a monthly format, it must now be updated weekly in order to provide an accurate picture for those handling financial planning.
The Monthly Bills Summary, updated for the week, is due in the hands of the Executive Council for the weekly Thursday night Executive Council meeting which includes FP.
The Bank Reconciliation Section of the Dept of Records, Assets and Materiel makes up the latest bank records of monies on deposit concurrent with the Monthly Bills Summary.
This section (concurrent with the Monthly Bills Summary) reconciles all bank statements, tapes all canceled checks on their counterfoils and in short makes certain there are no bank errors or omissions.
A Monthly Accounts Summary is then prepared showing the amount in each bank account. This too is a mimeographed form showing the names of the banks used, checks outstanding, etc. It also carries a total sum of monies in the bank.
This form also carries a section devoted to loans outstanding that the org must
pay.The Monthly Accounts Summary form, once made out, is then updated weekly and submitted to Executive Council on Thursday night for their financial planning.
The Collections Section of the Department of Income submits to the Ad Council a form called the Income Note Collections Summary.
This form carries an amount for cash collectible from notes (possible to collect) and a cash collectible from notes past due and the amount of notes that are apparently uncollectible. The total is added into grand total of Credit Advanced.
It gives the total of payments received during the month past (the 1st to the last day of the month).
It gives the number of statements mailed in the month just past.
It gives the number of persons with overdue notes who have been handed over to the Director of Clearing and passed on to field staff members.
The Income Note Collections Summary is then updated weekly and, along with the updated Monthly Bills Summary and Monthly Accounts Summary, is placed in the hands of Executive Council on Thursday night in time for the weekly financial planning.
The first action of the Executive Council is to prepare and get mimeographed the three forms described herein.
The second action of the Executive Council is to make sure the Treasury Division is so organized as to be able to make out the forms provided easily, that their files are so arranged as to do so and that personnel exists to do them.
The third action of the Executive Council is to make sure the persons making up the forms know this and other pertinent policy letters.
The fourth action of the Executive Council is to make sure that it receives the proper forms, updated each week and ready for use in financial planning.
The fifth and continuing action of the Executive Council is to make sure routinely the forms are accurate and actual and not generalized or “roughly estimated.”
The sixth and most important action each week is to plan financially on the basis of the three reports and set limits or restraints on POs or personnel numbers or whatever is necessary to achieve “outgo less than income” and get or keep the org solvent.
Upon completion of the financial planning, the Executive Council forwards the FP to the FBO for final approval.
The Executive Council’s actions of assigning conditions to divisions on the basis of the gross divisional statistic and actions in straightening up divisions in Emergency, strengthening Affluences and pushing standard promotion as per HCO Policy Letter 20 November 1965R, will keep income up.
It is more vital to pressure income up than to save money by financial planning restrictions. The Emergency Formula places, rightly, economy after promotion. Promotion comes first.
But economy is also vital. It is handled in relation to income.
When income is far down, the Executive Council simply shuts off all but promo- tionally vital POs.
Where a division is in Emergency the Executive Council shuts off all POs except those vital to promotion in that division. (The tendency of a division in Emergency is sometimes to demand extravagant or unwise purchases.)
The check-signing line contains all three of the above reports as of the last time they were prepared and a tape of all checks paid since.
Check-signing policy as already released thus requires the other two monthly reports as well as the other items specified.
To that policy, also add, that a check signer must, to sign a check, also have before him the last issued orders of the approved financial planning.
It is very easy to confuse a check-signing line with a financial planning line.
They are, however, completely different.
One signs any check only after financial planning has been done and approved and with the total reports of financial planning and decisions taken, before one.
Check signing is a secondary action and is the result of financial planning decisions.
One pays only what financial planning has okayed to be paid and how.
When financial planning indicates what to pay or not to pay, Disbursement makes up the checks and sends the lot to check signers.
Checks signed during the period are signed as authorized by financial planning each week, such as “Franking machine, FSM commissions and petty cash up to may be paid in the coming week.” This, part of the financial planning minutes of each meeting, is the guide by which weekly checks are made up, submitted to signers, signed and sent.
Unless all these actions are done, an org cannot in fact prosper, has poor credit and is generally upset.
One has to get in the income. That is done by income planning and demand, and by making divisions do their proper promotions and keep their statistics up. The mechanism is gross divisional statistics, assignment of conditions and investigating and putting right, divisions in Emergency and strengthening the actions that have brought about Affluences by Executive Council personal inspection. This is the first part of Executive Council assignment of conditions to divisions. Sometimes, where a divisional emergency is continued too long, the Executive Council has to order an E-Meter and case survey of its personnel as an SP is surely about.
In financial planning one safeguards what one gets in as described above.
Check signers and PO signers are not necessarily Executive Council members but, whether they are or not, are governed entirely by the last approved financial planning directive.
The financial planning directive of the week is issued promptly after the FP is finally approved, as a local Executive Directive, with the week and financial planning of it in caps, such as: FINANCIAL PLANNING FOR THE WEEK OF
Financial planning is the second part of the Executive Council assignment of conditions to divisions.
Long-range planning also appears on this directive. This long-range financial planning is not binding and is often changed in view of current happenings. It is a guide by which other executives can tentatively plan.