Finances are the life wire of every successful organization. That is why organizations pay key attention in ensuring the proper management of their finances. Financial management refers to the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization. So, how do you manage your financial resources to ensure productivity?
Financial resources management includes how to raise capital and how to allocate it i.e. capital budgeting. Not only about long term budgeting but also how to allocate the short term resources like current assets. It also deals with the dividend policies of the shareholders.
This is a specialized function directly associated with the top management. The significance of this function is seen especially in the capacity of ‘Staff’ in overall administration of a company.
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Truth be told, some managers until now, haven’t really understood why they continue to register failure in the area of financial management in spite of their effort. This article, therefore seeks to arm all managers and particularly financial managers, with some top secrets that will guide them into tremendous success.
Success in business requires training and discipline and hard work. But if you’re not frightened by these things, the opportunities are just as great today as they ever were. – David Rockefeller
Now, let’s examine the top secrets in financial resources management.
1. Proper Crisis Management
Unlike risk management, which involves planning for events that might occur in the future, crisis management involves reacting to an event once it has occurred.
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Organizations that don’t plan and budget well often require last minute efforts to get their work done. I realized that the result is often expensive overtime, missed opportunities to negotiate prices with business partners and customers, missed opportunities to use slow periods to accomplish work for little additional cost and increased chance of making budgeting errors.
A Financial Resources Manager who has developed proper crisis management skills will no doubt be able to handle outcomes of wrong decisions with dexterity and prevent the business entity from rushing into financial difficulties. I noticed that most robust financial managers are good crisis mangers as well.
Crisis management is inevitable for financial resources managers as they come across various crisis almost on a daily basis. You must therefore arm yourself with the acumen to deal with crisis without plunging your organization or company into difficulties.
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Know that crisis management often requires decisions to be made within a short time frame, and often after an event has already taken place. In order to reduce uncertainty in the event of a crisis, organizations often create a crisis management plan.
2. Setting Realistic Prices
Most organizations or business entities that set low prices for goods and charge low user fee in hopes of attracting clients may find that they are unable to recover their cost. Also, if prices are too low the organization may continuously lose money.
This is a particularly dangerous situation for not-for-profit organizations. Therefore, one of those strong secrets in managing the finances of organizations lies in setting realistic prices for goods and services.
The activity of pricing goods, services and assets, facilitating transactions, communicating prices and keeping track of them in fact consumes a very large amount of human labor-time, irrespective of whether it happens to occur in a centralized or decentralized way.
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Millions of workers are professionally specialized in such activities, whether as clerks, tellers, buyers, retail assistants, accountants, financial advisers, bank workers, economists, etc. If the work of these professionals is not done, price information would not be available, with the result that the trading process would become difficult or impossible to operate.
Whether or not this is considered “bureaucratic”, it therefore remains an essential administrative service. People cannot “choose between prices” if they don’t even know what those prices are; and, normally, they cannot just “make up” any kind of price they like, because costing, budgets and incomes depend precisely on what price is charged.
3. Accurate Analysis Of The Real Cost Of Doing Business
Being able to accurately analyze the real cost of doing business is a top secret in financial resources management. I have come across some organizations that often undervalue their program cost unintentionally. For instance they neglect to consider fixed costs such as rents when pricing their services.
However, if the full cost of each service provided is not recovered, the only result of increasing service volume is larger losses. So, you must be able to include rents, labor and even any other personal services you put in especially in a sole-proprietor business type of business.
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As the owner of the business, you need to place yourself on a monthly wage. Most business owners don’t know this and so consider that all the profit made from their business is theirs. While this may be true, it could be the reason for business failure because you fail to know that the profit of your business is owned by your business and not you. It has to serve the business.
4. Developing Multiple Funding Sources
Many organizations or companies depend heavily for funding from a single donor or from a government. In this case, the organizations’ activities may not be sustainable if the funding source decreases it’s funding.
Developing multiple funding sources is a great secret in the management of finances of organizations. While you enjoy funding from outsiders, I recommend that every financial manager be able to seek strategies to raise funds from within to ensure that in the absence of or curtailing of external funding, the organization will be sustained.
5. Reacting Promptly To Business Changes
Organizations must study the external and internal business environments carefully to avoid missing new business opportunities. Since business environments in most economies are volatile and ever changing, reacting to environmental changes is therefore a core secret in financial resources management.
Financial Managers who are observant and up-to-date as to where, when and how to invest in a given season, attract dividends to their organizations. Organizations must also be on the lookout for spiraling cost and react quickly, setting prices or cutting cost accordingly.
6. Analyzing & Interpreting Financial Information
Being able to analyze and interpret financial information is a top secrete in financial resources management. Organizations whose managers have access to financial information or are trained to interpret such information are at a plus. They are able to recognize risk or make appropriate decisions about the use of limited resources.
All financial managers must therefore be trained to read, analyze and interpret available financial reports in a timely manner and make the right decisions or recommend the necessary decisions to be taken. Every financial manager should be competent in understanding the figures.
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Financial information can make an origination if properly analyzed and interpreted or can mar it, if poorly or inaccurately analyzed and interpreted. So, understand this secret as manager and make a whole lot of difference in managing finances put at your disposal.
It is one thing for you to have these secrets and another thing to diligently apply them. The benefit of top secrets like these does not lie in knowing them, but in painstakingly implementing them against all odds. I strongly believe that as you set out to put these into practice the difference will be clear in your life and organization.
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