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Financial Management

Financial Management. Introduction. Preparation and monitoring of internal financial information (e.g. budgets) . Maintenance of financial records . Payment of accounts and credit control . Role of Finance. Payment of wages and salaries . Production of organisations

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Financial Management

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  1. Financial Management Introduction

  2. Preparation and monitoring of internal financial information (e.g. budgets) Maintenance of financial records Payment of accounts and credit control Role of Finance Payment of wages and salaries Production of organisations annual accounts Analysis of Accounting info e.g. ratio analysis

  3. Role and importance of financial management Vitally important to success or failure of an organisation. Efficient financial management has to: • Ensure funds available to achieve objectives e.g. • pay bills - materials, electricity, advertising • pay wages and salaries • acquire resources • develop new products • Ensure costs are controlled • Ensure adequate cash flow • Establish and control profitability levels

  4. Payment of wages & salaries • Work closely with HR department to calculate wages/salaries • Use information held by HR Dept. to calculate wages e.g. name, address, bank account details, sick days, hours worked etc. before payment takes place. • Most organisations use Bank Automated Credit System (BACS) Advantages: • No need for large sums of money to be kept on business premises • No need for large sums of money to be transported to the business premises • Cheaper for the business

  5. Payment of accounts Accounts fall into CASH or CREDIT categories. CASHaccounts • Normally paid to companies or individuals that the business doesn’t deal with on a regular basis. • Normally paid using petty cash. • Imprest used to meet daily cash expenses of the business. CREDIT accounts • Business receive goods or services and pay at a later date. • Amount and timescale dependent on ‘credit history’

  6. Maintenance of financial records • Companies must maintain financial records - a history of the business’s activities. • Inland Revenue require businesses to retain financial records for a period of 6 years for possible investigation. • Limited companies must comply with Companies Act of 1985 & 1989 which states that it is an offence not to maintain proper financial records.

  7. Managers and decision makers can make informed judgements and decisions based on financial information identified by the finance department. Identify financial information for decision makers Cash Flow Financial Statements and Reporting Financial Analysis Budgets

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