Financial management presentation

TOPIC FINANCIAL MANAGEMENTDATE: 21/10/2016TIME: 2PMTRAINER: CHINAZOR ONOVO

Outline:

Definition Financial Management Process Importance Of Financial Management Who is Responsible for Financial Management Principles of Financial Management Four Building Blocks of Financial Management Financial And Management Accounting Conclusion

What is Financial Management ?Financial management is the efficient and effective management of (funds) in such a manner as to accomplish the objectives of the organization. It is the planning, organizing , controlling andmonitoring of the financial recourses of an organization.

Financial management process

They are: Managing scarce resources Managing risks Managing strategically Managing by objectives

Managing scarce resources:

Organizations operate in a competitive environment where funds are increasingly scarce. We must therefore make sure that funds and resources are used properly and to the best effect to achieve the organization’s mission and objectives.

Managing risk:

Organizations face internal and external risks which can threaten operation and even survival (e.g. Funds being withdrawn ,office fire or fraud).Risks must be identified and actively managed in an organized way to limit the damage they can cause.

Managing strategically:

Financial management is part of management as a whole. This means organizations must keep an eye on the ‘bigger picture’-looking at how the whole organization is being financed in the medium and long term, not just focusing on projects and programmes.

Managing by objectives:

It involves close attention to projects. The financial management process mirrors the project management cycle-Plan, Do, Review – It is a continuous cycle.

Plan – Do - Review diagram

Why Financial Management is ImportantGood practice Financial Management will:

Help Organizations make effective and efficient use of resources to achieve objectives and fulfil commitment to stakeholders.

Help Organizations gain confidence of funding Agencies, Partners and Beneficiaries.

Give the advantage in competition for increasing scarce resources.

Help Organizations prepare themselves for long term financial sustainability.

Who is responsible for Financial managementThe diagram the demonstrates the day-to-day financial management tasks delegated down through the line management structure. At the same time, the accountability process comes back up through the structure as people report back on progress.

Principles of Financial Management

There are seven guiding principles of Financial Management: Consistency Accountability Transparency Viability Integrity Stewardship Accounting standards

Consistency:Consistent use of Financial polices and procedures are important for efficient operation.

Transparency:Organization must be open about their work , providing information about activities and plans to all stakeholders. This includes preparing accurate , complete and timely financial report.

Accountability:

All stakeholders have the right to know how finance and other support are being used to meet objectives.

(Accountability is the moral and legal duty placed on an individual, group or organization to explain how funds, equipment or authority given has been used).

Viability:

To be financial viable, an organization spending must be kept in balance with the money coming in, both at the operational and the strategic levels.Viability is a measure organization use to determine their financial continuity and security.

Stewardship:Financial stewardship involves taking good care of the financial resources we are entrusted with to make sure they are used for the purpose intended .In practice, organization achieve good stewardship through strategic planning, assessing financial risks and setting up appropriate system and control.

Integrity:

The integrity of any organization financial records and reports are dependent on accuracy and completeness of the its financial records.

Accounting Standards:

The system of keeping financial records and documentation must be of international accepted accounting standards and principles.Any accountant from any where around the world should be able to understand an organization’s financial accounting system.

The Four Building Blocks of Financial Management

There are four building blocks which must be in place to achieve best practice in financial management. They are:

Accounting records:

Every organization must keep an accurate accounting records of its financial transaction to show how funds have been used. Accounting records also provide valuable information about how organization is being managed and whether it is achieving its objectives .

Financial planning:

It is linked to the organization’s strategic and operational plan. The budget is the cornerstone of any financial management system and it plays an important role in monitoring the use of funds (e.g. fieldwork activity).

Financial monitoring

Organization having set a budget, have kept and reconciled its accounting records in clear and timely manner, it is then possible to produce financial report for all stakeholders. Internal budget monitoring report helps organization to monitor the progress of projects and annual financial statement provide accountability to external stakeholders.

Internal control:

System of controls, checks and balances –collectively referred to as internal controls. They are put in place to safeguard an organization assets and manage internal risks.Their purpose is to deter theft or fraud and detect error and omission in the accounting records. An effective internal control system also protect staff involved in financial tasks.

Financial And Management Accounting

For the financial management to take place effectively, financial systems and procedures need to cover two aspect of accounting.They are ; Financial accounting Management accounting

Financial accounting:

Financial accounting is the method of recording , classifying and summarizing information for various purposes. It is also the procedure used to keep track of financial and monetary transactions.Financial records can be maintained using manual or computerized system( or a combination of both).The main output of financial accounting is the annual statement used primarily for external accountability.(Auditors)

Management accounting:

Management accounting takes data gathered by the financial accounting process, compares the results with the budget and then analyze the information for decision making and control purposes.The management account are primarily for internal use and should be produced in a regular and timely basis- usually monthly or quarterly depending on the needs of the organization.

This table summarizes the main differences:

Financial accounting Management accountingRecords transaction Compares results against goalClassifies transaction Determines reason for variationReconciles records Helps identify corrective actionSummaries transaction Provides forecastsPresent financial data Analyses information

Conclusion

Many people have the impression that Financial management is just about keeping accounting records but it is an important part of programme management and must not be seen as a separate activity left to financial staff. Anonymous

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