Financial Management

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Financial Management Introduction ============ Every organization, irrespective of its size or ownership pattern, has to manage its finances. The overall objectives of an organization cannot be achieved in the absence of financial management. Many organizations fail in their objectives because of financial mismanagement and this failure rate is quite high among the small business enterprises. Hence, financial management is vital for all types of organizations, profit making as well as non-profit making. In case of non-profit making organizations also the effectiveness and performance depends on their financial resources management. Financial Management ==================== When we attempt to analyze the financial functions of an organization we find that funds (capital) have to be: Ø Procured Ø Allocated for various activities Ø Used effectively Ø Monitored Further, the results of all these have to be recorded also. All this brings to fore a three dimensional financial process: Ø Financial management Ø Management Accounting Ø Financial Accounting Ø All these three are at the same time separate yet overlapping areas of thee financial functions of an organization. 1. Oval: Financial Reporting Oval: Management Accounting Oval: Financial Management Financial Accounting deals with the measurements and reports of the financial position of the organisation and providies this to external users such as the shareholders, creditors, government agencies, etc. 2. " Finacial Accounting is the art of recording, classifying and summarising in a significant anner and in terms of money,... ... middle of paper ... ...ctual performance with budgeted performance is called budgetary control. This is a crucial activity because every organisation has to evaluate whether the activities and operations are going in the right direction for achieving the organisational objectives. The actual performance has to be compared with the budgeted performance on the basis of actual level of activity. The actual performance of each area of responsibility is measured through general accounting system in financial terms. Financial managers also go in for periodical review of budgetary performance and then apply corrective measures to ensure that the future performance is as per the budgets. There are many other aspects related to financial management and it is suggested that an entrepreneur should utilize the services of a financial consultant.
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