MFI Resources offers consulting in the following areas:
- Internal Controls
- Internal Audit
- Process Mapping
- Microfin
- Historical Financial Statement Analysis
- Delinquency Remediation
- Activity Based Costing (ABC)
- Treasury Management
Internal Controls
Well designed internal control systems insure accurate financial reporting and prevent fraud.
An internal controls evaluation will start with a thorough understanding of the following written process and procedure manuals:
- Loan authorization
- Loan disbursement
- Loan collection
- Loan delinquency
- Accounting
- Finance, and
- Human resources.
The details of these processes will be confirmed through site visits to the head office and several branches. The actual functioning of internal controls will be compared to the written manuals and departures will be documented. A report will be prepared outlining the findings, including recommendations to management.
Approximate time to complete: two weeks
Approximate cost, including travel, but excluding onsite lodging $10,000 1
Internal Audit
A well functioning internal audit department maintains the integrity of the internal control systems. As opposed to an external audit which focuses on the accuracy of reported financial information, the internal audit is focused on transaction accuracy.
An evaluation of the internal audit system starts with a thorough examination of internal audit manuals, several internal audit reports and audit workpapers. An on-site shadowing of the internal auditor will confirm written documentation and will provide additional opportunity to provide feedback and recommendations for improvement.
Approximate time to complete: two weeks
Approximate cost, including travel, but excluding onsite lodging $10,000 1
Process Mapping
Process Mapping translates written and observed procedures into visual process flow charts. The exercise of documenting processes in this manner is very useful in identifying segregation of duties conflicts and potential weaknesses in internal controls which may lead to fraud. In addition, duplication of responsibilities may be detected along with other procedure enhancements which will reduce costs and increase efficiency.
Process mapping starts with an analysis of appropriate manuals and existing documentation. This is followed up on-site with staff interviews, branch visits and thorough explanation of the maps. Areas of efficiency will be identified along with ares of internal control weakness which could result in fraud.
Approximate time as an add-on project: three days
Approximate cost as an add-on project: $1,500
Approximate time as a stand-alone project: two weeks
Approximate cost as a stand-alone project, including travel, but excluding on-site lodging: $11,500 1
Microfin
Microfin is the microfinance industry standard of turning operational assumptions in to forward looking financial statements. Budgeting with Microfin is extremely thorough and detailed, resulting in highly accurate projections. Because of the detail involved, some have benefited from assistance beyond what the Microfin manual and instructional videos provide.
A Microfin project can be accomplished onsite of remotely. Onsite can result in a quality projection, having gone through scenarios and back-testing assumptions against actual results for several months. Remote assistance requires a moderate internet connection, Skype for screen sharing, and the willingness and ability to research and make sure assumptions are accurate.
Approximate time as an onsite project: 3 days
Approximate cost as an onsite project, including travel, but excluding on-site lodging: $3,000 1
Approximate time as a remote project: 3 weeks, one hour per day, three days per week for a total of 9 sessions.
Approximate cost as a remote project: $2,000
At the end of each session of the remote project, the participant will be given homework to research and enter into the projection model. The input will be reviewed before the next session and written comments on outlying inputs, unreasonable assumptions or data input confusion will be provided.
Historical Financial Statement Analysis
Historical financial statement analysis provides MFI management with information to make operational decisions regarding key financial indicators. When compared to operational information such as APR analysis, this consultant has discovered operational efficiencies and MIS programming errors, which when cured, have increased portfolio yield by 23 percentage points and saved approximately $500,000 over 5 years in two different organizations.
This project will be done remotely and will take a maximum of one week to complete, given that all the required data is available when needed.
Approximate cost: $2,000
Delinquency Remediation
Delinquency remediation is required when levels of loan portfolio lost due to uncollected loans becomes unsustainable. Often the help of an external consultant is necessary to move the organization forward and help make some difficult decisions.
Initially, the consultancy will involve remote interviews to understand the scope and significance of the delinquency management issue. Initial ideas to bring delinquency under control will be explored.
Further onsite analysis will be needed to verify the remote assumptions and meet and gain confidence with management and staff throughout the organization. Once all data has been analyzed and a plan devised, the consultant will help management identify recommended actions and create a delinquency management team which will meet weekly to monitor results and report progress.
Approximate onsite time: two weeks
Approximate offsite time: over six months, weekly meetings are needed to discuss results and adjust the implementation plan
Approximate cost, including airfare, excluding onsite lodging: $18,000 1 2
Activity Based Costing (ABC)
Activity Based Costing uses time analysis of procedures and combines that with number, amount, or quantity of various "drivers" to arrive at accurate product costs. Several organizations have experienced significant cost savings through ABC and other have decided that variable loan pricing, based on loan cycle, has resulted in creased client retention.
An ABC consultancy, as opposed to other consultancies, requires two site visits. The first consultancy visit facilitates an understanding of what decisions the MFI is most interested in managing through the process, a draft of the resulting output model, and first hand observation of key activities and data gathering methods to arrive at needed "drivers". This information is then used to create time sheets for a representative sample of personnel to complete over the course of a month. The basic structure of the costing model is outlined, explained and taught through a series of workshops to team leaders.
The model is prepared and tested with a sample data set and verified over the data gathering period. The time sheet data is collected and aggregated offsite, then input into the the ABC model. Finally the resulting data, model, and observations are provided to management, with instructions and training on how to complete the exercise again and confirm the results during the second consultancy visit. It is important to confirm the results a second time before actions are taken, due the potential of sampling errors.
Approximate time: Two weeks onsite, in one week visits
Approximate cost, including airfare, excluding onsite lodging: $15,000 1
Treasury Management
Treasury management is critical for organizations desiring to be efficient yet prudent with the amount of cash on hand, how they manage foreign debt and the spread between interest charged on loans vs. the interest paid on debt. The asset liability committee (ALCO) generally oversees treasury management throuh the use of an ALCO report.
This consultancy involves reviewing current efforts to forecast cash needed for operations, repayment schedules for debt (and their related interest cost) and interest charged on loans, combined with future projection of inflation, currency stability and other macroeconomic factors. This data is used to create a custom model which will generate the ALCO report, which will include the ability to "stress test" the assumptions for likely, bad, and worst case scenarios.
Approximate time: two weeks
Approximate cost, including airfare, excluding onsite lodging: $10,000 1
Notes:
1 Cost for consulting services are estimated based on historical experiences,. Due to fluctuations in airfare and distance traveled, the cost may be lower. The cost of the consulting assignment is unlikely to increase, unless there is a mutual understanding regarding the level of effort required to complete the assignment exceeds the original expectations of the engagement.
2 The cost can vary widely due to the customized nature of the assignment. To be successful, a significant period of remote monitoring, which demonstrates determination to implement the agreed upon solutions, is highly recommended.