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Objectives of Financial Management ?

Objectives of Financial Management ?

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Objectives of Financial Management ?

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  1. Objectives of Financial Management ?

  2. Financial Management - Objectives • To achieve the ideal operating ratio/ Expense Coverage Ratio:- • By controlling/minimizing the revenue expenditure, • By achieving revenue targets and preventing the Revenue pilferages, • By maximizing the revenue collections/ recoveries from other organizations for the services rendered to them, • By properly implementing the opportunities of new schemes/services introduced from time to time.

  3. Expense Coverage Ratio • Expense Coverage Ratio helps to arrive at a conclusion as to whether there is a commercial gain or loss; • Expense Coverage Ratio is worked out with ‘Net Working Expenditure’ and ‘Net Revenue’.

  4. How to calculate ECR?

  5. Cont….

  6. Expense Coverage Ratio • ECR = Net Revenue receipt x 100 Net Working Expenses Where : • Net Revenue receipts = Gross Revenue receipts (-) Refunds; and • Net working expenditure = Gross working expenditure less depreciation and recoveries. • Figure of more than 100(ECR)means a profitable state of business

  7. Operating Ratio • Operating Ratio = Net Expenditure Net Revenue Where : • Net Revenue receipts = Gross Revenue receipts (-) Refunds; and • Net working expenditure = Gross working expenditure less depreciation and recoveries. • Operating Ratio of less than 1 indicates profitable state of business.

  8. Financial Management Tips

  9. FINANCIAL MANAGEMENT TIPS • Proper monitoring absolutely necessary : • (1) Expenditure does not exceed fund allotted under any head. • (2) Excess funds is surrendered timely. • - To keep watch over progress of expenditure and compare with proportionate grant every month. • Obtain Monthly statement from subordinate offices • for whom the allotment is sub divided. eg. Gazetted HOs. • - To ensure to incur proportionate expenditure every month. • Avoid incurring or committing expenditure in a particular year • and postponing payment of bills to the subsequent final year. • - Ensure that the expenditure is charged under correct head of A/Cs. • eg. SB, SBCO, Speed Post expenses should not be under PO. • OC – OE and M&E – OE etc.

  10. (1) Salary - Periodical establishment review - Computer norms - Verification of figures - Redeployment of posts / staff (2) Review/streamlining of work procedure. - simplifying operations. (3) Full utilisation of manpower - desired output - even distribution of work. - adjustment of duty hours w.r.t. workload. - management of peak hour traffic. - manage counter rush during lunch hours of other offices. (4) Productivity and Efficiency

  11. (5) Office Expenses • (i) Purchases • - excess, unwanted, costly items. • - indents to PSDs - excess indents. • - misuse of forms, stationary, bags, etc. •   - Quotations, Limited tenders, Open tenders • - DGS&D Rate Contracts • - Schedule of Financial Powers • (ii) Telephone bills, electricity bills • (iii) Inspection vehicle, MMS vehicles • fuel consumption – litre / km. • (6) Wages • Coolie charges for extra dispatch of mails • Delivery of heavy mails – Postmen coolie charges • Conveyance of cash w.r.t. traffic, revenue of PO. • - engagement of mazdoors / outsiders.

  12. Basic guidelines for incurring expenditure • The expenditure should always be proportionate to the total allotment. • By the end of December, 67% of the allotment should be spent. • Divisions are not allowed to spend more than 33% during the last quarter unless they receive any fresh allotment in the final grant.

  13. Basic guidelines for incurring expenditure • When excess funds are available, all the funds should be surrendered to RO before 10th of March. The surrendered funds can be utilised by the needy divisions/regions. • Rush of expenditure during the final stage of financial year should be avoided. • Whenever expenditure exceeds the allotment, the divisional head should proper action to get additional funds from RO. • In case of emergency, the DO has to address RO/Budget and get the clearance for spending any expenditure above the allotment. • Otherwise, the divisional head will be held responsible for such excess expenditure.

  14. Exercise 1