The Role of Financial Management - Report Example

Financial Management Introduction: The financial management meeting for any new company is very much important and being a active member of the financial management team one should understand how to handle the fund which has been taken and which is the main liability of the organization. For most of the financial meeting one of the main topics would the discussion of how to decrease the liabilities within the coming financial year and what would be the steps to maintain the proper balance between the cost and profit. Financial management is one of the main functional areas of any company. Finance is the word which technically has to deal with money in behalf of the company or the organization. This is the era of globalization and for any company to rise and compete within the market, understanding the finance and understanding how to manage it for the betterment of the organization is very important. Finance or the financial management is interconnected with all the other departments in the organization and all the cost and profits are controlled by the financial team, from funding to profit sharing, everything is controlled and handled by this important functional team and that is the reason, understanding the finance is very important. The financial world is full of technical terminologies which makes it difficult to understand. Managing the finance means basically managing the money and having effective control over the money and be responsible with the money of the company. For any new organization the balance between the inflow and outflow of fund is very important. It must be understood that an organization can be operating with a low efficiency for the continuous inflow of funds but the inappropriate financial decisions would make it rotten from inside which might not be seen from the outside but it would be a slow decay which would be understood within few years when it will be impossible to rectify. In any new organization if the finance is not managed properly or if it is not taken in a serious manner then, for the first few years would appear as it is going smoothly but slowly it would become a great concern while the management would see that, they are not reaching their break even within the stipulated time frame. Financial management is full of technical terminologies some of the important terms are Funds, Stocks, Balance Sheet, Profit and Loss, Budget, Audits, Corporate Governance and a very important term annual report. Each of these terms is related to each other and they are interdependent. For an example, if the budget is been prepared very regularly in any organization and the audit is not performed as regularly as the budget then it would become a very weak organization. The financial accountability have always been given a strong importance in many companies but in many instances the regular financial reports are being neglected, which makes the effectiveness of the financial management weakened even after giving a great importance to the financial factors.(Reid, 2004, P.1-3). The goal of financial meeting: Financial meetings are being made among the active executives of the organization or among the finance committee members. The meeting serves in two way, one, through the frequent meetings, they scrutinizes the different techniques of keeping the balance between the profit and loss, and the second one is to formulate some of the most important discussions currently made by the committee members about the future earning, the financial meetings work as the filter of all the discussions with respect to the recommendations to be presented in the main board meeting. The matters rejected by the joint committee members are not be submitted to the board. (Gordon, 2006, P. 140). The effective list of discussions in the meeting: Fund management: Being a member of the finance committee, the most important factor is to manage the fund in a proper manner. For instance, if the available fund is £ 10 m, then it is very important to distribute the fund in such a manner so it keeps the perfect balance of expenditure and profit within the organization. The lion part of the fund would go for the infrastructure development, machineries and equipment, and another important fund allocation is required for the marketing and promotional budget, as it is a competitive market and book printing and binding is basically “business to business” organization where marketing and branding is required to build the potential existence in the market. There are different budgetary procedures in allocating fund for the marketing and communications. In small and medium business organizations most of the time Top-Down (TD) budgeting procedures are done, where top management decides the amount to be spent for marketing and in some organization Bottom-Up budgeting (BU) is done where lower management submit their budget for the marketing expenditure. (Shimp, 2009. P.22). Marketing funds are always limited if all other important factors are well settled then the marketing budget should not exceed 10% of the gross revenue. (Gladden, & Olitte, 1996. p. 90). This company is a family owned business so in this case top down budgeting for marketing is suggested Auditor’s report: Proper financial analysis requires a proper auditor’s report, it is the important report where the company can come to know if there is any fault in the organization and if there is any financial mistakes occurred during the fund allocation or during the last financial quarter. A good auditor’s report is always comes with some loop wholes which should be rectified for the betterment of the organization. For any important financial meeting the review of the auditor’s report is very vital to take any decision towards the future prospects of the company. The other important facts to be presented are balance sheet which shows the performance of the company for the last financial year. And the most important, how the company is doing in the stock market. The fluctuation of stock prices depend on the future performance of the company. And with the profit and loss of the company the corporate governance of the company is deeply related. Stock market is very important as the future fund will come from them. Corporate governance and the stock market are interrelated, for any financial meeting the finance committee should remember that investors are always focusing on the company’s performance as the purpose of corporate governance is to motivate the corporate managers to maintain their faith with the investors (Macey, 2008, p. 1). Investors are always above all, as they are the external investors, who are putting the fund together for the betterment of the company. It should be always remembered that, the annual report is the report for which the corporate governance wait, to review the performance of the company at par with the promises made by the company towards their investors. Proper decision and planning technique is very important to perform consistently in this completive market. For the positive and effective decision the accounting plays a very important role. The accounting counts the cost and benefits of the proper decision options. The financial accounting information is very much important for the decision makers who are outside the firm, such as shareholders, auditors, creditors, taxing authorities etc. The financial accounting data are basically to satisfy the outside decision makers over the company’s performance. (Balakrishnan, Sivaramakrishnan & Sprinkle, 2008, p.12) Proper financial planning and decision making techniques should be applied for better outcome of the organization and few factors important for making proper planning are, one: lower cost and better quality, two: differentiate products which command higher price, three: proprietary assets, four: higher quality products and services, five: efficient production, six: rapid product development, seven: advanced feature and innovations. Publisher of multiple printing such as magazines and year book have advantages in production and distribution methods which reduce the cost per copy and eventually which reduce the cost of production which creates efficiencies in mass production than the other printing and publishing companies who publish few titles. The financial meeting is basically the meeting of the committee where the combined decision is taken to submit the final financial report to the board. So as a conclusion the main concerns are as follows. “How did the company performed financially in last quarter or last year?”, “The rectification of the financial stabilities as par the auditor’s report”, “how to please and convince the outside decision makers, that is, the corporate governance?”, “the proper financial planning according to the performance”, “analyze the opportunities and threats in the present market scenario” in this contexts the committee member should not forget that the online media is a big competition as many books are released online and they can be read online. The combined report or analysis of all of these above mentioned concerns are finally noted which is supposed to be submitted to the board. References Balakrishnan R,Sivaramakrishnan, K, & Sprinkle G.(2008) Managerial accounting . NJ: John Wiley and Sons. Gladden, C & Olitte, A (1996). Marketing and selling A/E and other engineering services: an essential guide to create your own program, Virginia: ASCE Publications. Gordon, R (2006). Business leadership in large corporation: with a new preface. CA: University of California Press. Reid, J (2004). Seven fundamentals of effective financial management. Cape Town: Juta and Company Ltd Shimp, T(2009), Advertising promotion, and other aspects of integrated marketing communication. Ohio: Cengage Learning. Macey, J (2008), Corporate governance: promises kept, promises broken. New Jersey: Princeton University Press. Read More