Financial Management and Cash Flow Principle of Accounting - Essay Example

FINANCIAL MANAGEMENT AND CASH FLOW PRINCIPLE OF ACCOUNTING The section contains the fundamentals and basics of accounting language. Accounting is very important in our day to day activities. It helps us in coming up with financial statements, external reports and regulating cash flow in any organization. For the managers, accounting helps them in operations, performance analysis and budgeting in their firms. In accounting, every transaction must be recorded in its appropriate ledger sheet. Each transaction must have two sides .The credit side representing what was received, the debit side representing what was given. The ledge must always balance at all times. There are basics to know when making cashbook entries. The assets increase with a debit and decreases with credit .The revenues and the liabilities decrease with a debit and increases with a credit. Finally , the expenses are increased with a debit and decreases with a credit. Accounting is always subject to interpretation, opinion and consistency. The most important topics in this section are role of accounting and finance. The topic will help me appreciate accounting as an important entity in any thriving institution. Financial statements as a topic will help with interpretation of my personal bank statements .Accounting basics and double entry as topics will help management and development of my own personal cashbook for a local business. Journal entries as a topic will help in reconciling cash book statements of my business with the statement as per the bank. FINANCIAL MANAGEMENT AND CASH FLOW PRINCIPLE OF ACCOUNTING 2 Financial analysis is very important in accounting .It helps in identifying whether the business or the company has made profits or losses. Financial analysis is always done from period to period, when a significant change has been noted or between companies to company. There are various types of financial analysis. These are: current ratios, profitability analysis ratios, activity analysis ratios, capital structure analysis ratios and capital market analysis ratio. Budget is another function of the managers. The financial analysis and statements helps managers to make financial allocations and plans for oncoming activities that require funding. Budgeting is always done annually and allocated to the respective departments. During budgeting, financial history, assumptions, external factors and flexibility must be put into consideration to make the budgeting process effective. Financial accounting also helps in planning. Financial planning helps in control of resources, coordination of activities, time management and improved productivity. Budgeting is always important to managers in allocating funds for the intended activities of the company. This is to avoid impulse spending of the company’s resources. Valuation refers to the process of estimating assets and liabilities worth of an organization. Valuation of property is always done when the company wants to sell or purchase an asset. Valuation process will also influence the selling and buying decisions in terms of the pricing. Valuation of the company property can also give it opportunity to acquire loans from the bank. This is important in the case of defaulting the loan the property can be auctioned .Planning is useful in organizing events like weddings .Budgeting is also important in organizing events that involve using finances. Valuation is applicable when aspiring to buy a property. Financial analysis helps in auditing. INTELLECTUAL PROPERTY Intellectual property is always protected from unauthorized use or modification by those that want to benefit unlawfully from other peoples work. Such protections include patents. Patents are always given to those with useful ideas, inventions or plants. Copyright is always given to the original work of authorship. The author will always be benefited from copyright till death thereafter the family members for another 50 years after the death of the author. Trademark is used to identify the source of goods or services. This will prevent other companies from offering similar goods or services. A trade secret is used to protect commercially valuable and protected information. Those that own or have developed intellectual property are always advised to register their work with the federal government. This is always important for public record keeping, to file suit in case someone violates the laws protecting the intellectual property. The registration also helps in the presumption of valid ownership. There are a variety of factors that are always considered when determining the patentability of intellectual property. These are utility, unable, novel and non obvious. Utility determines the usefulness of the invention. Enable refers to its description in such a way that allows others to make and use it.           LEADERSHIP Management is the act of coordinating the effects of the people to accomplish desired goals and objectives using available resources effectively. Management comprises of planning, organization, staffing, leading or directing and controlling an organization. The skills required for manager are political skills, conceptual skills, interpersonal skills, diagnostic skills and technical skills. Leader A leader is one who influences or leads others .The leadership traits are integrity, vision, communication   , relationship, persuasion, adaptability, teamwork, coaching and development, decision making   and planning. INTERNATIONAL ISSUES IN BUSINESS ENGINEERING International business has been around for centuries. Trade has become more diverse .It not only deal in goods and services, but in financial capital, technology, ideas and knowledge. The factors that influence trade between countries are resource endowment, technology and efficiency in production and exchange rates. The global integration of markets has led to rise in trade. The exchange rate is the r in which two currencies are traded for each other. The exchange rate simply tells how much a foreign one can buy which the currency of their country. Before the countries established the international monetary fund, they used gold as the standard currency. Today, the U.S dollar is now the vehicle currency and the reserve currency. Presently, currency exchange rates are set using a number of ways depending on a particular country. They can use the market, a peg to another currencys value and the government. The exchange rate is very important during the stock exchange in banks. Franchising simply refers to business management techniques. Franchising and licensing involves selling the right to use intellectual property. This is another way in which owners of the intellectual property benefit from their work. Political risk assessment and management is very important during investing in a foreign country. The investor is advised to assess the political atmosphere in a particular country before setting up a company. This is to avoid future risks and disappointments. PROJECT MANAGEMENT DAY 1 A project refers to a temporary endeavor undertaken to create a unique product or service. It uses resources for the accomplishment of objectives and has specific deliverables and timeline. A project constitutes the following; objectives and goals, tasks, defined scope and specification, schedule for completion, budget and life cycle. Hence a project requires planning, organizing, staffing, controlling and directing. Project management is basically about getting things done through planning, organizing, integrating, directing and controlling all committed recourses in order to attain set objectives. Project management has a goal to meet expectations on time and under budget. Additionally project managers should posses the following skills: leadership, conflict resolution, creativity and flexibility, ability to adjust to change, proper planning and negotiation. Project management starts with planning. It is done in step which includes; defining project, planning, lead the process, controlling and completion. Business always aims at maximizing profit with the following strategies: provide the best service, provide the best technology, value added, take advantage of a niche and be the fastest. In the desire to optimize profit business are faced with constraints such as money, time and performance. Therefore meeting set goals can be achieved through proper monitoring and evaluation of the project. Project and project management operate in a broader environment than the project itself. It involves high risks and uncertainties and should therefore be managed by dividing the project into project phases. Finally measure the completion of a phase. Project scope management includes the processes required to ensure that the project includes all the work required and only the work required for successful completion. This is achieved by: initiation, this involves committing the organization to begin next project phase. Scope planning, involves developing a written scope statement, scope verification and scope change control. In conclusion, project management can be simplified into two steps: planning and accomplishment. Basically planning is done to obtain a better understanding of objectives, reduce uncertainty, improve efficiency, define work and provide a basis for monitoring the work. Proper planning is therefore the backbone of successful project implementation. PROJECT MANAGEMENT DAY 2 A proposal is the most common way a service company secures new business. It is a written document that contains an offer from the seller to the prospective buyer. In the consulting world there are killers and eaters. The consultants bringing in the work are the killers while the consultants doing the work are the eaters. The success of a company can be measured in terms of how well they attract and win proposal. It is therefore important to develop high quality proposals because it enables consultants to secure a new job. A successful proposal should have a subjective tone as it an advocacy piece and selling document that speaks for the company. A number of considerations for preparing a project proposal are as follows: Audience appreciation that includes Engineer, technical, CEO and cost. A position that is who will make the final decision. Goals (time, performance, money) must clearly describe multiple goals and objective. Market objectives, political issues and risk allocation. The above considerations are significant because once the proposal is appealing to the engineer implementation becomes easier. UN-competitive proposals are a waste of time and the proposal is a presentation of you and your company’s capabilities hence must be of high standard. There is a defined scope of work for the completion of the proposal which involves: Determining the technical approach, developing a work breakdown structure, designing a network schedule, Estimating costs and actual writing of the proposal. This can be achieved if the mission, objective and goal are well defined and are in line with the company’s strategies and plans. The specification addresses the level of quality at which a product or service will be delivered. Provide a statement of the customer’s required standards. Often times a series of specification will be provided by the customer. These specifications may include: design drawings, equipment, site preparation and installation procedures. Some of the specific examples covered by specification include: acceptable permitted discharge limits and chemical compatibility. In addition, for a successful project an engineer should ensure proper time management since Time management results in greater efficiency. The project team should be relevant to the work. In conclusion the project manager should have entrepreneurial traits like creativity and innovation and provides good leadership throughout the project phase. QUALITY CONTROL/ ASSURANCE Quality control is a key issue in business. For it to be effective engineers need other skills, life experiences and engineering education. A business process is a collection of related, structured activities that produce a specific service or product for a particular customer. Process is important because it provides a set of instructions to complete a task. Additionally, the use of consistent instructions creates the foundation on which process control, process capability, and process improvement can occur. Thus, without the process there is no opportunity for improvement. The history of quality range in the following stages: Inspection: Middle ages – early 1900’s. Quality Control and Statistical Theory: 1920’s – 1950’s. Taylor and Shewart. Quality in Japan: 1950’s. Deming and Juran. Total Quality: Introduced in Japan in 1969. Total Quality Management: Mid 1980’s and 1990’s. Quality Awards and Excellence Models: Early 1990’s. Business Excellence: Malcolm Baldridge 1988. To date: Continued use of Business Excellence (TQM philosophy) with a focus on ISO and other unique compliances depending on industry and customer. Total Quality Management (TQM) is a comprehensive and structured approach to organizational management that seeks to improve the quality of products and services through ongoing refinements in response to continuous feedback. TQM can be applied to any type of organization; it originated in the manufacturing sector and has since been adapted for use in almost every type of organization imaginable, including schools, highway maintenance, hotel management, and churches. In conclusion, Quality itself involves Conformance to specifications. Hence for a successful project the engineer should go with the set standard in order to achieve the desired quality. This can be achieved and by using Total Quality Management (TQM). RISK ANALYSIS Risk analysis is the science of risks and their probability and evaluation. Probabilistic risk assessment is one analysis strategy usually employed in science and engineering. Risk analysis should be performed as part of the risk management process for each project phase. The information of which would be based on risk discussion workshops to identify potential issues and risks ahead of time before these were to cause cost and schedule negative impacts. Engineering risk analysis methods, based on systems analysis and probability, are generally designed for cases in which sufficient failure statistics are unavailable. These methods can be applied not only to engineer systems that fail like new spacecraft or medical devices, but also to systems characterized by performance scenarios including malfunctions or threats. Additionally some of the challenges in the use of risk analysis tools are mainly in problem formulation, when technical, human and organizational factors need to be integrated. This type of analysis requires both imagination and a logical, rational approach. It is key to pro-active risk management and effective ranking of risk reduction measures when statistical data are not directly available and resources are limited. MARKETING, SALES AND BUSINESS DEVELOPMENT Marketing, sales and business development are key tools in business since business always aims at profit maximization. Hence this aid to achieve that aim in the following ways: develop marketing strategy, determine market consumers, determine target consumers, determine contribution strategy, produce a product roadmap including features and price target, develop and maintain competitive analysis, develop and maintain brand and attain and manage customer satisfaction process. The marketing department is responsible for determining what type of customers to reach, where they are located, their taste and preference, and generally how to attract them. The sales department is responsible for building a relationship with the target customer and using marketing tools to attract the customer to product or service. The business development person is responsible for getting the customer to the business. A business plan is a document used to detail plans for a start-up or existing business. This document describes business goals and strategies as well as provided a blueprint of financing, marketing and operational execution plans. Essentially it provides detailed information on where a company is going and how that will be achieved. It is customer driven, it can become an organizational change agent, it prioritizes investment thus provide a standard format for communication. Account plan is a customer specific plan whose purpose is to understand customer needs, competitors and lay out a plan to accomplish specific customer objectives. Sales process involves providing a framework to systematically identify opportunities and lead a communication platform, aligns the team, and utilizes best practices from various teams. Hence without the process there is no opportunity for sustained improvement. The value proposition is an offer that describes the quantifiable benefits that individuals or organizations making an offer promise to deliver. Its development is based on the review and analysis of the benefit, cost and value that an organization can deliver to its customer, prospective customer and the constituent groups within and outside the organization. In conclusion business is a key aspect of development and thus Small company start-up is significant for continuity. This can be done in various ways which include; starting from scratch, this is a virgin business. Purchase already established business from the owner. Franchising which refers to an established product, business, operational model and brand. THEORY OF CONSTRAINTS Theory of constraints is a model that was suggested by Eliyahu M. Goldratt. It refers to a thought process and a way of thinking that can be quite useful in understanding complex problems, in resource allocation and in decision making. It relies on intuition rather than math and detailed analysis. It provides an overall system view of solutions rather than local optimization. It is a focusing process. Theory of constraints is important to engineers and managers to understand problems and make decisions and allocate resources. This is significant because traditional analysis and problem solving tools can often be misleading. Hence result to managerial and work ineffectiveness. Theory of constraints is a simple process that aids decision making via exploiting hidden and obvious constraints. The model is a process as follows: Identify the system goal and its measurements, identify system constraints, decide how to exploit the system constraints, decide how to exploit the system constraints , subordinate everything else to the previous decision, elevate the system constraints, if the previous steps a constraint has been broken go back to step one. There are three types of constraints. Physical constraints are those that are tangible and easy to recognize. They include machine capacity, material availability and space availability. Market constraint refers to a situation when the demand for a product or service is less than the capacity of the organization or not in the desired proportion. Policy constraints are not physical in nature and include the entire system of the company. In conclusion a plant should employ the theory of constraint model. This is so because it is more profitable with this program than without it. Always attempt to identify the system constraints and focus all your attention there everything else is not necessary. Read More