is the endeavour of the efficient use of important enterprise resources
required for running business. It entails planning for, acquiring, and deciding
how to utilize funds in ways that maximize the efficiency of the organization’s
Financial management consists of creating a systematic method
for the collection of financial data that is useful for making
decisions about the operations of the organization of an entity as well as
meeting reporting requirements of legitimate authority such as accounting
bodies and financiers.
Figure 4 Financial management Process
1. Why is
knowledge of financial management important for a manager in Oxfam?
Every activity in an organisation revolves
around money. Every decision you make will either bring in or take out money,
save or lead to loss of money organisational money.
Discuss some examples of each.
is the business language. This is the language spoken in business arena in
board rooms, fund raising meetings, procurement etc.
is a key driver of organisational success.
Organisational and project performance is
expressed in monetary terms.
Oxfam competes for scarce resources and
therefore it is important to utilize funds efficiently.
Good Practice Systems: The
Building Blocks of Financial Management
What do you expect from this session?
Figure 5 Building Blocks for Financial
This systematic and accurate keeping records
of organisation’s transactions. It is the responsibility of everyone to keep
records within their area of operations. Accurate records will tell the story
of how money was spent and where we are.
Identify some of the accounting records
that your function is likely to need
Financial planning complements strategic
planning. Budgeting a key tool in financial Management. It is telling our money
where it should go.
It is imperative to monitor finances. This
is possible when we know where we wanted our money to (Budget) and the reading
the story (Accounting Records). We can keep track.
What some of the reports do you often receive
or prepare? Discuss (5 Mins)
These are checks and balances put in place
in order to safe guard the organisations assets, staff and generally instil
order within the organisation, such us who authorizes what?
Financial Control- Making Sound Decisions
The outcome of sound financial management
systems is bases for sound decision making. Ultimately, this is the goal of
Components of financial Management
the financial management process to take place effectively, financial
and procedures need to cover three aspects of accounting. Financial Accounting,
Management Accounting Financial Management.
can be as shown below:
Figure 6 Components of Financial
All the three process can be performed in a single
department but in larger complex enterprises they are performed by different
Difference between Financial Accounting, Management
Accounting Financial Management.
Although the three functions have a lot in common, there
are some significant differences. Please see the table below.
Table 1 Comparison of Components of
management, creditors, Government, investors etc.
and highly regulated
as per chart of accounts
based on Accounting reports details
contain both accounting and narrative operative information
v.Presents financial data
i. Compares results
Determines reasons for variations
Helps identify corrective action
i. Analyses cost of raw
Determines variation of costs of raw materials
Helps identify corrective action
Provides costs of production
complete record of the financial transactions.
for management decisions, such as Setting strategy
and controlling costs and determining pricing
Healthy is your country programme