Financial Management Decisions

Are you the person in charge of the majority of family financial management decisions? For many people, that prospect is about as enjoyable as an emergency appendectomy on your first day of vacation. However, handling your personal finances does not have to be such a daunting job. There are many tricks, tips, and tools to make your financial life easier, more profitable, and more secure. Before you can make any decisions, you need to get a full picture of your finances.

At the very start of the business, owners or shareholders will instantly be faced with financial matters that require financial decisions. Questions such as what assets to invest in and where to get the cash needed for such investments would require financial know-how. And as the business venture thrives, shareholders have to manage daily finances and make long-term financial decisions. All of this definitely requires more than just a little knowledge in business. It requires knowledge in an entirely different area – the area of financial management.

Cost cutting is not always the answer – allocate resource to “added value” projects – in today’s world cutting heads is a an easy short term fix, do not throw out the baby with the bath water and leave the firm with projects in-flight with no experience to deliver them. Instead review your project spend and as in (2) concentrate on adding value.

Investment decision – this involves the profitable utilization of firm’s funds especially in long-term projects (capital projects). Because the future benefits associated with such projects are not known with certainty, investment decisions necessarily involve risk. The projects are therefore evaluated in relation to their expected return and risk. For these are the factors that ultimately determine the market value of the company. To maximize the market value of the company, the financial manager will be interested in those projects with maximum returns and minimum risk. An understanding of cost of capital, capital structure and portfolio theory is a prerequisite here.

One of the biggest benefits of a course on finance for managers, who are not directly involved with financial matters, is that they will be able to better oversee or supervise budgets allocated for different departments. They will be able to learn more about the basic financial principles used in the budgeting process – and this plays a significant role in becoming a successful non-financial manager. It is advantage for non-financial managers to be able to understand finance and accounting concepts so they can translate them into terms used in decision-making (which they pretty much do everyday).

Accounting records your business’s financial history — it only tells you what has happened with the venture’s money in the past. However, by analyzing financial reports that come from an accurate accounting system, the wide open roads of the future come into clearer focus. You can see where the bulk of your income comes from (specific services, product lines, sales staff) and you can alter your marketing accordingly. You can see where the money goes and make decisions about managing expenses.

Having knowledge about finance and accounting is very important in business because these are what it’s all about. Through this they are able to understand the concepts of finance and accounting and utilize them to make sound finance-related decisions for the company. These types of lessons are especially designed for managers which do not understand the concept of finance very well.

Your first and most useful resource in financial management should be the board treasurer. It is your responsibility to find a person experienced enough to take on this role, which requires you to have some understanding of what the treasurer’s part is in your business. Getting an accountant to keep the books, developing financial statements, and conducting financial analysis is also a good idea for controlling business costs. These people will be entrusted with your budget information and will be essentially responsible for every penny that passes from and into your hands. This is why the more experienced your accountant and treasurer are the more secure your budget.