Financial management plays a key role in a business’s smooth operation. It helps to plan all the strategies required to avoid unforeseen circumstances. Financial management helps us to avoid unnecessary expenditures. According to the report by Exploding Topics, about 250 billion total downloads of finance apps are done per year. These apps teach core skills to manage finances efficiently. To manage finances, personal loans in Gurgaon are taken, helping one to prosper without any worry!
For example, GreenTech Manufacturing uses financial management practices to manage cash flow, expand operations, and ensure long-term profitability and financial stability. It involves planning, budgeting, investment decisions, risk management, as well as financial control.
The Principles of Financial Management
Principle 1: A financial budget must be set to offer a tool to
- project resources required to attain a unit’s goals as well as objectives,
- calculate current financial performance,
- discover important transaction errors, and
- distinguish considerable changes in circumstances or the conditions of business.
Principle 2: A financial budget must be practicable. It should make sense and be attainable by the company.
Principle 3: A financial budget must be based on a thorough analysis that involves:
- a clear budget’s purpose identification to the unit’s mission, goals and objectives,
- a detailed assessment of the unit’s financial requirement to fulfil its goals, and
- a plan to enhance resources or modify goals and objectives
Principle 4: Financial results must be compared to the budget regularly to:
- distinguish changes in various circumstances or the business environment
- locate transaction errors
- evaluate financial performance
- make sure unrequired costs are being avoided
- make sure that expenditures are reasonable and necessary to achieve the unit’s goals, and
- transactions are sufficiently supported.
Principle 5: If financial results vary from the set budget, a manager must follow certain points:
- determine the cause,
b. evaluate the activity, and
c. take corrective action.
Principle 6: Units must be to work and operate within their budget. Justifications must be offered as the expenditures are more than the allotted budget. In addition, units must develop a formal plan to eliminate the deficits generated.
Principle 7: All expenditures must comply with all relevant policies, rules, as well as regulations.
Principle 8: The unit must assess the financial consequences before a new activity is started.
Principle 9: Each unit must ensure that the advantages are more than the costs for any planned activities.
Principle 10: Each unit must offer sufficient safeguards to protect against the loss or unauthorised use of university assets.
III. Responsibilities and Practices
Section 1: Planning and Budgeting
All planning and budgeting must include:
A mission statement with goals and objectives for each unit. This statement should be simple, direct, attainable, and include measurable goals. It must be specific enough to be integrated into the overall planning and budgeting process. A thorough process for identifying, implementing, and evaluating activities required to achieve the unit’s goals that are based on prudent and supportable projections that have taken into account the needs and impact of certain key factors, including:
- student enrollment,
- supporting and auxiliary services required,
- supporting and auxiliary services required,
- space, equipment and supplies requirements,
- salaries and benefits,
- anticipated revenue,
- capital expenditures that are not included in the campus master plan, and
- interdependency among units.
- Interdependency among units.
Section 2: Monitoring and Evaluating Financial Data
This section must include monthly financial reports that are suitable. These reports must:
- be clear, concise and detailed,
- identifying all sources of revenue and expenditure,
- offers budget versus actual comparisons,
- identify trends as well as the special areas of concern, and
- highlight exception items.
A review of revenue and expenses at the end of each cycle. If such a review tends to reveal issues, these must necessarily be addressed in time to take action. A review must be done before the next cycle ends, and control procedures must be implemented. It is done to correct the situation if reporting exceptions continues.
Conclusion
To sum up, it is clear that financial management plays a significant role in the company. It ensures planning and organising finances. With solid financial management, a company can save itself from unnecessary expenses. It also makes sure to promote the growth of the business venture.
