Management of Financial Resources for Sustained Success...

Management of Financial Resources for Sustained Success  Financial resource is a very important resource which an organization needs not only for its functioning  but also for its sustained success. For this purpose the organization need to have systems in place that help it to both fund its ambitions and also to manage its financial resources in support of its daily operations, including funding for improvement activities. Normally financial controls are applied by the management which enable it to take a proactive management position in the business. The three most important financial controls are namely (i) the balance sheet, (ii) the profit and loss statement, and (iii) the cash flow statement. But the management of financial resources is much more than the exercising of the financial controls. The management of the financial resources is an important function of the management in the organization. This financial management starts with the financial planning. Financial planning is a continuous process of directing and allocating financial resources to meet strategic goals and objectives. The output from financial planning normally takes the form of budgets. Financial planning works from the strategic and business plans to identify what financial resources are needed to obtain and develop the resources to achieve the goals in the two types of plans. Typically, financial planning results in very relevant and realistic budgets. Financial planning normally starts at the top of the organization and has basically two components namely (i) planning for operations, and (ii) planning for financing. Operating people focus on production and sales while financial planners are interested in how to finance the operations. Financial planning is the process that encompasses both operations and financing. In a normal organization, typical financial functions within an organization are a host of the accounting activities such as...

The Process of Annual Budget Preparation...

The Process of Annual Budget Preparation  Annual budget for an organization is prepared for a year and is a comprehensive plan, a coordinated set of detailed financial statement of operating plans and schedule. It is the organization’s formal plan of action for the budgeted period. Annual budget is the best document for understanding the micro economics of the organization for the forthcoming budgeted period. Departmental budgets are the basis for the organization’s annual budget since it incorporates all the department’s budgets. It finally takes the shape of projected profit and loss statement and the balance sheet at the end of the budget period. It incorporates all the operating and the financial decisions. In the budgeting process, the annual budget provides a single map explaining how the organization intends to earn profits and positive cash flow for the coming period. It also helps different departments of the organization to coordinate their activities so that together they can meet the overall goals and objectives of the organization in the budgeted period. In an organization preparation of an annual budget is a daunting yet extremely important task. By definition, preparing the budget entails hard choices. These can be made, at a cost, or avoided, at a far greater cost. It is important that the necessary trade-offs be made explicitly when formulating the budget. This will permit a smooth implementation of priority programs, and avoid disrupting program management during budget execution. The annual budget is a comprehensive planning document that incorporates several other individual budgets. The annual budget is usually classified into two individual budgets namely the operational budget and the financial budget. The annual budget formulation process has the following four major dimensions. To set up of the fiscal targets and level of expenditures compatible with targets....