BSBFIM601 MANAGE FINANCES

Financial Management is a vital activity in any organization. It is

the process of planning, organizing, controlling and monitoring
financial resources with a view to achieve organizational goals
and objectives. It is an ideal practice for controlling the financial
activities of an organization such as procurement of funds,
utilization of funds, accounting, payments, risk assessment and
every other thing related to money.

Financial Management means planning, organizing, directing and

controlling the financial activities such as procurement and
utilization of funds of the enterprise. It means applying general
management principles to financial resources of the enterprise.
A BUDGET is a statement that indicates a coordinated plan of activities.
It needs to be prepared to guide an organisation in utilizing resources
and directing operations so that particular goals can be achieved for a
certain time period.

A FINANCIAL PLAN is an important tool that helps an organisation

achieve long-term financial objectives. It is similar to a budget, but it
is more goal-oriented

The objective of budget or financial plan is not only to reduce the

impact of uncertainty but also to determine priorities in use of the
resources.
 GUIDELINES IN PREPARING BUDGET

1. Develop ways of estimating your expenses

This includes estimating expenses for the coming financial or fiscal year and reviewing
the assumptions about the company's business environment that were used as the
basis for the last budget, and update as necessary, for example yearly rent or salaries.

2. List the estimated yearly expense totals of the necessities of the organisation
These may include salaries or wages for all employees, rent and/or mortgage
payments for the organisation’s space, utilities and insurance.
3. List the estimated expenses for things that are needed to conduct the activities of
the organisation, for example program and office supplies and equipment.
4. List estimated expenses for anything the organisation is obligated to pay, for
example loan payments.
5. Add up all the expenses items listed in above steps
 IMPLEMENTING BUDGET

1. Strategic Plan
This ensures that organizational resources are used to support the strategy
and development of the organization. It means budgeting toward the vision.

2. Business Goals
Goals need to be developed and there needs to be accountability for
achieving goals. This is typically the responsibility of the management team,
board or business owner

3. Revenue Projections
Revenue projections should be based on historical financial performance,
as well as projected growth income. The projected growth may be tied to
organizational goals and planned initiatives that will initiate business
growth
4. Fixed Cost Projections
Projecting fixed costs is simply a matter of looking at the monthly predictable costs
that do not change. Employee compensation costs, facility expenses, utility costs,
mortgage or rent payments, insurance costs, etc.

5. Variable Cost Projections

Having a formal and structured budgeting process is the foundation for good
business management, growth and development. Variable costs are costs that
fluctuate from month to month, supply costs, overtime costs, etc.

6. Annual Goal Expenses

Goal related projects should also be given budgets.
Each initiative should have projected costs associated with the goals.
This is where the cost of implementing goals are incorporated into the annual budget.
7. Target Profit Margin
Every organization, whether they are for-profit or not-for-profit, should have a targeted
profit margin. Profit margins allow for returns for the business owner or investors.
Not-for-profit organizations use their profit margins to reinvest into the facilities and
development of the organization. Profits are important for all organizations and healthy
profit margins are a strong indicator of the strength of an organization

8. Board Approval
The governing board, president, owner or head of the organization should approve the
budget and keep current with budget performance. Again, similar to your personal
finances, the owner should be reviewing monthly financial statements for the following
reasons.

To monitor budget performance.

To be familiar with all expenditures.
To safeguard the organization against misappropriation of funds or employee fraud.
9. Budget Review
A budget review committee should meet on a monthly basis to monitor performance
against goals. This committee should review budget variances and assess issues
associated with budget overages.

It is important to do this on a monthly basis so there can be a correction to overspending

or modification to the budget if needed.

Waiting until the end of the year to make corrections could have a negative affect on the
final budget outcome.

10. Dealing With Budget Variances

Budget variances should be reviewed with the responsible department manager and
questions should be raised as to what caused the variance.

https://thethrivingsmallbusiness.com/developing-and-managing-a-budget/
What Is Included In The Financial Report?
These reports are more digestible when they are generated through online
data visualization tools that have numerous interactive dashboard features,
to ensure that your business has the right meaningful financial data. These
reports will give your business the ability to:

• Track your revenue, expenses, and profitability.

• Make predictions based on trusted data.
• Plan out your budget more effectively.
• Improve the performance of your processes.
• Create fully customizable reports.
 But what exactly does a finance report consist of?

Balance sheet: This displays a business’s financial status at the end of a

certain time period. It offers an overview of a business’s liabilities,
assets, and shareholder equity.

Income statement: This indicates the revenue a business earned over a

certain period of time and shows a business’s profitability. It includes a
net income equal to the revenues and gains minus the expenses and
losses.

Cash flow statement: Details a business’s cash flows during certain time
periods and indicates if a business made or lost cash during that period
of time.
https://www.datapine.com/blog/daily-weekly-monthly-financial-report-examples/
 FINANCE AND ACCOUNTING PERSONNEL

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1. List your income for the period covered by your report
2. Determine the cost of goods or services you sold.
3. Compute your gross profit.
3. Provide an itemized list of expenses over the course of the same period
5. Subtract your expenses from your gross profit
From the example financial statement, complete the
financial report by

1. Draft a Statement of Retained Earnings

2. Creating a Balance Sheet

3. Write a Statement of Cash Flows