Financial management is the use of tools to reflect the financial health of a business. It enables you to plan, using projections, the future financial performance for capital, assets, and personnel requirements. It will also permit you to maximize the return on shareholders' investment.
Cash gets consumed in many ways in business. In recent years, high growth companies, especially those involved in ICT and manufacturing have found that revenue gets consumed in areas previously unanticipated for. For example:
1. volatile interest rates
2. excess inventory
3. overdue accounts receivable
All of these will have a negative effect on your balance sheet. It would be wise to anticipate them and plan for ways in which you could increase your cashflow, through more sales, investments, loans etc.
What an eye opener. 3 major holes contribute to money leakage.
BalasPadamcud u please tell me a closer view of :
BalasPadam1. volatile interest rates
2. excess inventory
3. overdue accounts receivable
i just want a few example 2 understand it..
feel free 2 share ur knowledge.. :D
Iyoko,
BalasPadam1. volatile interest rates mean you have to pay more for loan without planning it. In other words, if you scheduled your monthly payment for 2000, according to previous rate, but then you have to increase payment due to increment in rates.
2. excess inventory means you bought something that shouldn't have to. Eg; you bought 2 photocopy machines but your business scale only need one machine. That mean you have to pay for 2 machines installments instead of only one. This what called excess inventory. And also higher electricity bills.
3. overdue account receivable means you haven't receive payment from your customer. If you received payment on time, you can use the money to pay for others; eg, suppliers, loans etc. But when you haven't received payment, you have to use other sources. In other words, you have to pay supplier but you haven't receive payment from customer.
I hope these answer you q. I do appreciate if you have any comments/suggestions as I'm also in learning stage.
economically, there is 2 cost, an implicit cost and an explicit cost in financial management..sum manager didnt calculate an implicit cost as one of their cost in business..well dude, well done, nice entry for budak hingusan like me..ihiks..
BalasPadamBlin classics of the genre, I laughed heartily ...
BalasPadam