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In order to run a successful business there are many roles that must be executed. One major
role within a business is finance and financial management. The role of finance in business
is to monitor and plan for the future. Since the role of finance is to monitor and plan
financial management is the actions used to do so. In financial management we see
activities such as planning, budgeting, creating structure, as well as decision making. Using
ratios such as debt ratio which is total debt divided by total assets planning can be done to
pay out outstanding debt quicker. Financial management utilizes many ratios such as ones
for liquidity, assets, inventory, accounts receivable, fixed assets and working capital, total
assets, debt, coverage, profitability, and market value. Using these ratios with the data
collected for monitoring business activities we can plan, organize, and direct/control funds
to reach business goals.
Out of all of these ratios we learn this week the ones I am most familiar with is the ones for
accounts receivable management. As a bookkeeper for a housing complex I use these to
track our average collection period of rent owed.
The role of financial management in business is to manage a company's wealth and make
strategic decisions to help the business become and stay profitable for years to come.
Everything come down to money and there are countless tools to make managing assets a
lot easier. Financial managers use all types of tools in their profession. Mostly, I would say
they would use accounting / financial reports to gauge where they stand financially and use
real time data for like trading stocks and commodities. They also use tools they developed
to charge customers for their services, whether it be a percentages of sales or a flat fee it all
has to be figured out and documented properly for the information they have to be
determined useful. The role of finance in business to put simply is to determine where the
company’s money goes for maximum efficiency. Financial management’s purpose is to
effectively divide assets and invest them into departments where they are needed to form
department budgets. These budgets will be used to reach company goals such as specific
projects that the company has chosen to go with to stay relevant within the economy and to
maintaining specific operations. Activities for financial management is of a large variety
such as determining department budgets, analyzing data reports, collecting financial data,
etc. however the most important activity of financial management that I would say
personally is proper communication. Communication with executives and the departments
is key to making sure that the company is investing their financials in the right places with
the right amounts to achieve the company’s projected goals. The tools they use to
accurately perform their jobs are accounting softwares, various data charts and logs,
accounting reports, and current economy reports. Many tools are used in finance and if the
financial management can use a tool to work more efficiently and effectively then they will
use it.
The role of finance in business involves management of money when facilitating certain
departments. Financing helps you, as a company, see how much profit you're making and
whether it exceeds your costs. This helps someone understand the financial situation of the
company. Some activities involving financial management are long term investment
decisions, long term financial decisions, and working capital management. These all require
some sort of financial background before moving forward, with investments it is important
to look at how well the company preformed the previous years. A tool that financial
managers leverage to access and/or monitor the health and performance of a business is
ratio analysis. This helps the manager to look at the four aspects of a companies financial
state. In my opinion, finance in business is extremely important because it affects things
such as profitability, expenses, cash and credit, so that the "organization may have the
means to carry out its objective as satisfactorily as possible. Financial management is the
effective handling of money through planning, organizing, directing and controlling
funds in a corporation.
Financial management involves three major types of decisions:
(1) long-term investment decisions: Purchasing or building a new warehouse, merging
with another company and/or takeover of another company
(2) long-term financing decisions: taking out a loan to acquire more assets
(3) working capital management decisions, which are short-term in nature. These
decisions concern the acquisition and allocation of resources among the various activities of
a firm.1
Top Financial Management Tools
Accounting Systems.
Expense Tracking.
Budgeting Tools.
Payroll Management.
Easy Billing.
Inventory Tracking.
Tax Preparations.
In my 30+ years working as a worker’s compensation claims adjuster, I have had some
experience handling and managing money. It is my professional opinion and analysis of a
claims potential exposure that we are able to resolve claims. In my line of work, I need to
adequately reserve a file for full exposure based on the information and facts we currently
have. Finance helps a business determine what they can do going forward. Financial
management specifically helps you line up all of your options with their pros and cons to
determine which plan to go with.I work for an oil and gas company that operates all over
Texas. Every time our land department decides to sell or purchase a single well or an entire
field of wells finance is going to help them make their choice. When we purchase an entire
field then not only has our team had to determine if it was the best investment, but our bank
had to have a certain level of proof as well. Often, when it is that large of a purchase, we
get a loan from the bank that we then pay off in a certain amount of time with the revenue
from that field. When we go to the bank for that we have to show proof that if something
happens to that field and it suddenly doesn't make the revenue expected that we can still
pay off that loan through the use of our other assets.In our company because the state of a
single well can change at any time, they have weekly meetings with our CFO to keep him
appraised of any problems as well as our current revenue. Then when our VP of
Accounting closes out the end of the accounting month there is another big meeting with
our owners and our CFO. This meeting helps them determine if they need to make any
changes to the plan. With all of the employees there is a quarterly meeting that covers
where we hit our goals and where we fell short. It covers our cashflow and shows us where
we need to improve. If we did fall short, then they explain to us why. Sometimes, it is more
about the price of crude rather than something that we did. Finally, at the end of every year
they decide what their plan and goal will be for the following year.It is one of my favorite
things about this company. They are very transparent with their employees and their owners
are always incredibly appreciative and generous.
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