Financial resources are a very important resource that an organization needs for its continued success and not only for its functioning. The organization needs to have systems in place to both fund its ambitions and manage its financial resources to support its day-to-day operations, including financing for improvement activities, to this end.
The management usually imposes financial controls that enable it to take a proactive management role in the company. The three most relevant financial controls are the balance sheet, (ii) the profit and loss statement (iii) the cash flow statement. Yet there is far more to the management of financial capital than the practice of financial controls.
An significant role of the organization's leadership is the management of financial capital. Financial preparation begins with this financial leadership. Financial planning is a continuous process in which financial resources are focused and distributed to achieve strategic goals and objectives. Generally, the production from financial planning takes the form of budgets.
Financial planning typically begins at the top of the organization and essentially has two components: operational planning, and (ii) planning for finances. Although financial planners are interested in how to fund the operations, operational people concentrate on production and sales. The mechanism that includes both activities and funding is financial planning. Some of the benefits of managing financial resources are as follows:
Better Decision Making
Financial planning typically begins at the top of the organization and basically has two components: I organizational planning and (ii) funding planning. Operating individuals concentrate on production and revenue, while financial managers are involved in how operations are funded. The mechanism that includes both activities and funding is financial planning.
Financial leadership contributes to the openness of all company knowledge. It systematically documents all the information and makes it accessible to all business users. Better openness helps to establish proper understanding inside and outside the company and prevents any misunderstandings or mistakes.
One of the better benefits provided by financial management is managing an organization's finances. To exercise financial control, it regulates and manages all activities of the organization. Finance managers ensure that all company operations are in line with the projected expense and do not go beyond the pre-established budgets.
Enhances Managerial Efficiency
In an organisation, financial management is responsible for ensuring proper financial discipline. This means that all financial resources are used wisely and there is no waste. Financial administrators control all workers' operations and strive to derive better outcomes from them.
Profit Maximization and Wealth Maximization
The goal of financial management is to maximize corporate benefit and shareholder capital. It aims to gain high profits by reducing operating costs and using all capital effectively. The greater the profit received by the company, the greater the dividend declared by the company to its shareholders. It'll raise their wealth this way.
Determines Adequate Capital
It is an essential job to estimate an appropriate amount of capital a company needs to start and continue its operations. The correct amount of funds needed by the company is calculated by financial management so that it can be obtained on time.
Management of resources is the procurement, distribution and management of the resources needed for a project, such as individuals and their expertise, finance, technology, materials, machinery and natural resources. Management of resources ensures that internal and external resources are efficiently utilized on time and on budget. Resources can be acquired from the host organization internally or purchased from external sources.
The description and availability of resources, linked to resource demand preparation and related reporting, enables scarce resources to be used efficiently. Standardisation of processes and procedures often saves the wasting of money and the spending of funds on the wrong items, a big cost-saving factor. All of the above contribute to the overall project achievement.
The best way to efficiently leverage capital is to follow the three-step method set out below:
Allocation requires the description of the services required to finish the job, i.e. The required quantity or the amount of effort required. The cumulative amount consumed at any point in time is shown by the accumulation of resources on a daily, weekly, or monthly basis. To measure the resources needed to produce the work and when they will be necessary, resource scheduling is used.
You can then handle the schedule more efficiently if you know the resource distribution and understand the consumption. In certain cases, complex scheduling strategies can need to be implemented to ensure that the project achieves its goals.
These include -resource smoothing (used when priority is given to time constraints) and resource levelling, which provides a resource stock balance, i.e., Reducing surpluses and shortages when resources are available. Both strategies can need to be used occasionally. The fully resourced schedule must be realistic, and the management team must have support.
Microeconomic Market Model
Microeconomics is concerned with individuals and firms' economic decisions and behavior.
There are numerous theories within the broad church of microeconomics that stress certain assumptions and perceptions of economic behaviour. Neo-classical theory is the most important theory, which stresses free markets and the belief that individuals are rational and aim to maximize utility.
We need a macroeconomic model to understand and evaluate the causes and consequences of business cycle fluctuations. As we shall see, these models are based on explanations of expenditure decisions by households and business, financial market conditions, production costs and producer pricing decisions at different levels of output. Models also capture the objectives fiscal and monetary policies and provide a framework for policy evaluation. A full macroeconomic model integrates different sector behaviours and the feedback across sectors that can moderate or amplify the effects of changes in one sector on national output and employment.