Financial Mgmt Principles

Key Financial Management Principles

Consistency

Same accounting method used at all times

Cost

Control spending on services on equipment

Matching

Expenses and revenues in order

Knowing where the organization stands at all times

The goal of this organization is to be successful. In order to be successful, the organization must handle its finances with care. Good financial planning cannot be underestimated. Many surveys have identified that around 74% of business closures were attributable to poor financial management. A good business have a business plan that incorporates financial budget for projected sales, expenses, net profits, staff needs and purchase of assets. The level of profitability in a business will have an impact on the liquidity of the business, and this must be continuously monitored. The amount of cash in the business daily and the credit available from bankers must be sufficient to allow the businesses to trade. The measure of business’s efficiency is the manner, in which it maintains its records promptly and collects its overdue receivables (www.bukisa.com). The key financial management principles the organization will follow are: Consistency, Cost, Matching, Objective Evidence, and Full disclosure.

Consistency: In being consistent, the orgainization will use the same accounting principle at all times which is the Generally Accepted Accounting Principles (GAAP). GAAP are accounting rules used to prepare, present, and report financial statements for a wide variety of entities, including publicly-traded and privately-held companies, non-profit organizations, and governments. Generally GAAP includes local applicable Accounting Framework, related accounting law, rules and Accounting Standard.

Cost: Cost is simple because it is simply what the organization pays for equipment or services that it will use. However, spending too much on an equipment or service that does not enhance the organization or generate revenue would be a...