The foundation of organizational stability and operational success lies in the essential resource of finance. The organisation needs to have its systems in place so that it helps to manage financial resources for daily operations and funding to improve activities. Financial resources and their management is an essential management functions within the organisation. It starts with proper financial planning. It is a continuous process that helps to allocate and direct financial resources for meeting all strategic objectives and goals.
It refers to organising, strategic planning, controlling, and directing of finances that are undertaken in an institute or organisation. It includes applying principles of management to financial things and aspects of the company and plays a very crucial part in the process of fiscal management. Below are some objectives that involved:
- Efficient and optimum funds utilization.
- Maintaining enough funds supply for the organisation.
- Creating safe and real opportunities of investment to invest in.
- Ensuring the organization’s shareholders get a profitable return on the investment.
What are financial resources (FR) and their types?
These are assets and funds that can finance investments and activities of the organisation. It helps the business to operate and grow as well as in some ways it becomes easy for a business to raise success and use financial resources. Each organisation consists of a process or framework for organising, monitoring, planning, controlling, and directing financial activities and resources for delivering business goals. This is called financial management or financial resource management (FRM). It is of two types:
Internal finance sources like funds are achieved from within any business. Example: profits that are generated or achieved by business and retained capital funding, liquid assets, and earnings. Internal FR is free of interest and considered economical from the point of view of the business because the organization need not pay any interest that applies to debt and borrowed capital- granting financial position in the business.
External financial sources are funds that come mainly from outside of the business. Examples of this source are credit and loans like banks. This type is helpful mainly for new organisations or business that wants to expand and grow and also looking for investors to provide guidance, expertise, and funds within the organisation.
What are financial Resource Management (FRM) and its main areas?
FRM is overseen mainly by an individual person like a finance manager or CFO, a third party like a chartered accountant, or a dedicated department or team. This team or person manages or influences various financial activities in business from usage or procurement of funds to processes for payments, risk assessments, and accounting. They are accountable to shareholders of the organisation and stakeholders expert prudent decision-making and adequate returns. Some main areas included in financial management are:
- Resources: This area determines how to allocate, raise, and use FR.
- Performance : This area monitors metrics and financial activities that help to solve all issues and ensure good financial health.
- Risk management: It analyses and identifies financial liabilities and risks connected properly to business as well as determines actions that are based on the objectives of the organisation, its appetite and tolerance for risk as well as financial performance, sustainability, and health.
- Financial controls: It helps to manage balance sheets, financial forecasts, derivatives, loss statements, valuations, profit statements, cash flow, and so on.
- Planning and strategy: It includes strategic planning, business planning, and financial planning as well as looking for everything starting from its financial inputs to processes of management.
Analysis tools of financial management
- The discounted flow of cash: It is a method that values an organisation, asset, or project using time value-related concepts of money. Cash flows are discounted and estimated by using capital cost to give present values. DCF analysis is used to compute the value of NPV which takes input discount rate and cash flows and provides present value as an output.
- Risk management: It attempts to identify all threats and manage them properly which bring down or impact the organisation severely. This involves reviewing the organisation’s operations, identifying threats and occurrence of likelihood as well as taking actions appropriately for addressing threats.
- Cost-benefit analysis (CBA): It is a systematic approach that estimates the weaknesses and strengths of alternatives that can satisfy activities, functional requirements, or transactions for business. This technique also determines some options that can provide some best approaches and strategies for practice and adoption regarding benefits in time, savings, cost, labour, etc. It is a process used for comparing and calculating the cost and benefits of a decision or project.
- Sensitivity analysis: This technique is used for determining the different values related to the independent variable to create impacts on the dependent variable under some given assumptions. It is used within some decided or specific boundaries that depend on either 1 input variable or more than one.
Benefits of managing financial resources
- Enhances managerial efficiency: Financial management (FM) is the important and responsible process that ensures financial discipline within the organisation. That means financial resources can be used wisely with no waste. Financial administrators help to control the operations of workers and provide better outcomes.
- Profit maximisation and wealth maximisation: The main goal of FM is to increase shareholder capital as well as a corporate benefit. It also helps to gain profits at a high level by reducing its operational costs.
- Resource management: It is a process used for distributing, managing, and procuring all the resources that are required for completing the project like individual persons along with their expertise, materials, natural resources, finance, machinery, and technology. It also ensures efficient external and internal resources that are utilised on budget and on time.
The discussion of financial management in this article highlights its significance in running a stable and profitable organisation. So it is a crucial topic of management studies and practical application of this concept is ensured through assignments. But sometimes due to the complexity of the topic or hectic schedule students face difficulty in completing them. If you also facing issues in understanding this field and completing the assignments or projects then you can contact us at Treat Assignment Help UK. Here you get plagiarism-free and 100% original content.