Poor financial planning at TEA Automation and Electric Technology Co., Ltd.

Abstract

TEA Automation and Electric Technology Co., Ltd have worked for more than five years under the leadership of two experienced technicians. In the beginning when the company has established. The company revenue grew really fast, the next year's revenue increase more than 100% of the previous year. 2018 is the highest revenue that TEAC has been reached in five years. However, in 2019, the trend of growth slowdown due to many reasons. After conducting in-depth interviews with TEAC's BOD and staff. The author got the authority from TEAC's BOD to analyse the company's financial statements in two years 2018, and 2019. At that time, the company still haven't finish consolidate the company's financial statements in 2020. However, after analyse the secondary data and combine with the primary data get from the in-depth interview. The author withdraws three symptoms at TEAC that related to three aspects of finance with the corresponding are Negative cash flow from the Cash flow statement, Low Net profit margin from the Income statement, and High Inventory days from the balance sheet. After read some theories, and got advice from the supervisor. The problems at TEAC should lead to three symptoms are related to finance and the nature of the core problem and difficult to change in the near future if the company doesn't solve the root causes. Two potential problems should be "Poor Cash flow management" and "Poor Financial planning". Combine with the theory, the secondary data, and re-confirm from the company. The main problem is Poor financial planning. Combine with theory-informed, empirical study, and after validating with the company, the main causes that lead to that problem are "Lack of financial literacy", and "Lack of financial control". With the found main causes, the author also discussed with TEAC and suggested two solutions that meet the requirements of the company are the solutions should not be too expensive and could be implemented in phases. The author also designs the solutions with the detailed benefit & cost, together with the action plan and the person in charge for each activity. The aim of the thesis is to figure out the causes of the main problem and design the solutions that have the high abilities to solve the problems. After discussion with the company, the solution of "Training for the owners of TEAC to improve the financial literacy" and "Hire an internal accountant" will be implemented in 3 phases and the priority is to conduct the Training for the owners first. The evaluation stage is out of the thesis's scope of work. However, the author will follow up with the company to observe and support the company to implement the plan in order to lessons learned for future studies.