Managers of finance often struggle with managing finance in the absence of a formal finance policy. Managing finances can be a time consuming and confusing task, if a manager has not yet developed a well-structured and well-informed process for assigning responsibility, tracking and evaluating finance outcomes. As the financial service of providing finance to businesses or organizations changes rapidly, financial managers need to consider four areas when deciding what strategy to implement:
Managers of finance must have a clear understanding of what their objectives are for the financial management function. In particular, managers of finance should consider if the function has multiple functions and/or customer priorities. Successful, effective, and satisfying business operations require a balanced approach to the use of all elements of the financial function.
Appropriate financial policies must be drafted to address issues, such as incentives and penalties that should not be a part of the finance planning process. Policies may be designed to ensure that inappropriate behavior is avoided at all times, regardless of whether there is a monetary penalty involved.
Managing resources, including accounting, finance, and human resources, is a complex area of finance management. A multi-functional approach that includes business functions, such as human resources, accounting, and finance, is beneficial for the management of finance.
Delivering financial management functions efficiently, while still allowing for timely, accurate results, is the key to effective management. Managers of finance should ensure that they have identified resources that are available and capable of completing the work. In addition, managers of finance should allow those resources to make decisions about how to allocate resources among needs, including factors like customer or staff preferences, quality of service, and the company’s environment.
When managing finance, managers should establish performance goals and evaluate their performance against those goals. Performance measurements should be used to document progress. Managers of finance should regularly evaluate their performance and make adjustments to enable the financial function to provide support to key business outcomes.
Key performance management (KPM) is an effective and comprehensive approach to tracking, controlling, and measuring financial activities. A key performance metric or KPM is a quantitative framework for measuring the quality and quantity of service provided by the finance function. Performance is monitored through goals and targets established by the manager of finance, which should be based on expectations for the organization’s financial resources and services.
The key performance metrics used for KPM include processes for monitoring, controlling, and measuring key financial activities, as well as key financial outputs. Financial management policies should clearly define the goals and objectives of the financial function and identify the means by which it will measure and report performance.
Management is the technique of controlling and directing activities and resources toward the achievement of specific business objectives. Management systems provide a systematic way to monitor and control finance resources for improved service delivery and cost savings.
Financial management tools and techniques include the following: as well as specific procedures for managing finances. In addition, various forms of management systems exist that provide specialized management tools to improve financial effectiveness and productivity. They can provide effective means for tracking, controlling, and reporting financial activities for the purpose of delivering a more rewarding and satisfying business experience.
A well-planned and organized management approach to improving operational effectiveness and productivity is the basis for effective finance management. A well-defined vision is an essential ingredient for a successful finance function.
The above factors constitute only a fraction of the factors related to effective management. Managers of finance should seek assistance from other, qualified, professionals in the field of finance to help them develop a well-defined strategy to address the various situations in which a finance function finds itself.