Key Concepts of Financial Management

Regardless of whether you sell a product or service, operate locally or nationally or sell to
consumers or other businesses, many basic financial practices remain the same. During both slow
and boom times, it’s important to maintain consisting accounting practices. Understanding key
concepts for managing your company’s finances will help you minimize your expenses and
maximize your profits.

Budgeting
One of the most important concepts of financial management is budgeting. Spending money
without a plan or without regard to your sales can lead to overspending, missed bill payments and
decreased profits. Create a master budget each year for your business that includes income and
expense projections, a cash flow statement, a balance sheet and a profit-and-loss statement.
Perform a budget variance analysis each month or quarter to determine if your budget projections
were accurate or if they need to be adjusted.

Reporting
To make the most effective decisions regarding marketing, distribution strategies, pricing, hiring
and other aspects of your business, you’ll need accurate information regarding how each decision
you make might affect your bottom line. Accurate and regular financial reporting helps you know
exactly where you stand financially, how different areas of your company and different initiatives
are performing and what your resources are. A balance sheet lets you see your company’s assets
and liabilities at any time. Cash flow reports tell you if you can pay your bills on time or if your
collections process is inefficient. Knowing your available credit and what your interest costs are
provide important information about your purchasing power and profit margins.

Cash Flow Management

A common reason small businesses struggle or fail is poor cash flow management. Even when
income is greater than expenses, you still might find yourself short of cash and unable to pay bills
if you don’t time the receipt of your sales invoices with the due dates of your bills. Accurate and
timely cash flow statements help you avoid production shutdowns, loss of customers and damage
to your credit.

Tax Planning
Without proper planning, you will pay more taxes than you need to and risk fines, penalties and
liens. Effective tax planning can help you reduce payroll taxes, lower your income tax liability,
avoid paying sales taxes late and avoid surprises that arise when you are hit with tax bills larger
than you expected. Work with a tax expert to minimize your tax liabilities and meet you obligations
on time.
Debt Service
The more debt you carry, the more interest you pay, raising your overhead costs and lowering
your profits. Even if you have no problem paying your credit card bills or loan amounts, high debt
can lower your credit score, potentially decrease your ability to get more credit when you need it,
and raise the interest rates you’ll have to pay on future borrowing. Effective financial planning
includes monitoring your debt and managing it on a regular basis.

What is Ethics in Finance?

The ethics in finance incorporate truthfulness, integrity, honesty, justice, and
fairness in all sorts of financial activities.

Financial ethics or business ethics are actually subsets of general ethics. It is

crucial for maintaining harmony and stability in financial services
where people interact with one another and do any sort of financial or
monetary transactions.

What do you mean by Finance?

Finance talks about money about the market or other financial resources for
example financial markets, investment, insider trading, etc.

The field of finances is diverse, and it is mainly about the definition and
interrelation of many factors such as money, risk, and time. These are assets
that take the form of money, where banks serve as the primary facilitators.

In the domain of financial markets, there are a plethora of activities that deal
with the management of monetary funds. This backbone can help and direct
companies in conducting their business.

Companies can use this as a metric to know their position in the market and
leverage it to win a position over others. The knowledge of finances is also
essential for making future investments, acquisitions, and other decisions. It is
the heart and brain of any organization and has to be carefully followed.
What is Financial Ethics or Ethics in Finance?
Ethics governs the course of action taken by a human that can be right or
wrong.

Generally speaking, ethics form the person’s attitude to do right; and they can
be specified in terms of a profession or even an organization in the form of
business ethics.

Since a company is primarily based on financial needs and directives, it must

follow the ethics route towards the future. This can be achieved both internally
and externally, thereby resulting in a suitable environment for employees,
stakeholders as well as market position.

Ethics is one of the most critical and intricate aspects of an organization,

especially in domains like finances. There is either “right” or “wrong”
associated with any human action based on the organization’s conventional
morality and business ethics.

Importance of Ethics in Finance

1. Provides a moral code of standard

In the financial market, some barriers range from unequal information, misuse
of power and resources, etc.

In such cases and those which involve third-party connections, there is a dire
need for a proper code to be followed in the industry. From investment to
trading to stock to economical activities of the corporate or finance system, all
follow an ethical code in all their transactions

2. Ethics in finance channelizes confidence in business/corporate dealings

The main objective of the financial industry is to have direct dealings with the
industry.
These directly connect to their clients in the form of product or service delivery
where they look forward to winning their confidence.

Despite the primary objective to maintain a competitive stature in the industry,

they must do so on ethical grounds. In addition to such practices, being
ethically right will gives businesses good returns in the long term.

3. Ethics makes business/corporate behavior and activities harmonious

In the financial industry, we can expect many people to be part of an

organization.

Since these have to work together at different levels and towards a similar
core objective, there has to be a set of ethical rules and guidelines that have
to be followed.

This will help in proper management and higher productivity from the
employees.

Codes of Ethics in Finance

Different moral codes that are supposed to be followed the finance-related
behavior of a company towards its employees, customers, public and other
stakeholders-

1. Acting with honesty and integrity while handling dilemmas of the world
of finances
2. Not associating with any real/clear conflicts of interest in personal, or
company relationships
3. Providing information that is full, accurate, fair, complete, relevant,
objective, understandable, and timely in and for different documents and
reports
4. Acting in accordance with all the applicable rules, laws, and regulations
of governments along with other relevant public/private regulatory
agencies
5. Acting responsibly and in good faith with due care, carefulness, and
competence without any sort of misrepresentation of material facts
6. Respecting the confidentiality of information which is acquired in the
business course and such information should not be used for the
personal benefit
7. Promoting ethical behavior among all the associates and stakeholders
of a company
8. Adhering and promoting a code of ethics in the company

Key Terms of Financial or Business Ethics

Key terminologies that are an integral part of the information,
investment, stock, trading, customers, and transaction sorts of activities
of finances are-
1. ESG

The full form of ESG is Economical, Social, and governance, and their
positive impact show if the finances-system and related information are
ethical or not.

2. Green finances

It talks about finance that focuses on offering measurable and positive

environmental results
3. Principles for Responsible Investment
It is a set of six principles that give a global standard for responsible
investment
4. Shariah-compliant finances
It talks about the finance information and activities that are supported by
Islamic-based principles
5.Sustainable finances
It is commonly used in substitution for ethics finances
6. UN Global Compact
It is a voluntary initiative based on CEO commitments for the
implementation of ten universal sustainability principles such as
environmental responsibility, human rights, employee relations, anti-
bribery and corruption, and business ethics
7. UN Sustainable Development Goals (SDGs)
It covers the 17 key goals that the United Nations published by
focussing upon the alleviation of poverty, climate, inequality,
environmental degradation, peace, prosperity, and justice.
 Implementation of Ethics in Finances
To deal with ethical problems in finances like those ranging from ethical
codes in place for financial professionals to the replacement of the
egoistic theory, there are a large variety of domains covered in business
ethics.
It is not an uncommon practice of applying ethical means in
contemporary businesses. These codes adhering to a morally
established financial set of ethics are regulated and maintained by self-
regulating agencies and official regulating authorities.
These are kept in place to ensure ethically and morally responsible
behaviour from the various operatives that operate in the financial
market.

Conclusion

Ethics is one of the most important factors in the world of finances.

In the financial industry, the participating organizations must follow a proper

ethics code. This is necessary for the internal functioning of the organization
as well as external decisions that affect it.

Since finance is the backbone of any business and ethics are of similar
importance, ethics in finance must be followed religiously without any
discrepancy.

Ethics in Retail: Importance and Ethical Practice

towards consumers
September 14, 2019 By Hitesh Bhasin Tagged With: Marketing

Ethics in business have become an essential topic of discussion. In retailing,

retailers want to earn maximum profit by providing satisfaction to their
customers with ethical means. Some certain laws and regulations govern the
retail sector.
Following these laws are important and beneficial for the organizations. In this
article, you will learn about ethical behavior in the retail sector and its
importance.

Ethics can be defined as the moral principles for the behavior of a person or
an organization to conduct activities. Business ethics tell the difference
between right and wrong activities. However, ethical conduct in business is
not as simple as it seems. There are various complexities when It comes to
ethical conduct.

Ethical order ensures a sense of order and justice in an organization. The

concepts like Corporate Social Responsibility is introduced in the retailing
sector. The CSR is related to the ethical expression to conduct business.
Retailing is the end unit of the Supply chain.

Customers directly interact with retailers. Therefore, it is important that

retailers act ethically as they impact the lives of many people. Ethical
practices are not only moral responsibility of a retailer, but it has great
importance for the retail business. Let us learn about them one by one.

Table of Contents

Importance of Ethics in Retail

#1 Build a Positive Image in society
Various areas of ethics in the retail business
1. Proper practice of Laws, rules, and regulations:

There are different laws, rules, and regulations such as labor laws, shops and
establishment laws, Companies’ act, and weight and measurements act, etc.
related to the retail sector in every country.

All organizations and their employees are required to follow them in their
conduct with the customers and with each other.

2. Protection of interests of customers and their rights:

The first and foremost obligation of an organization and its employees is to
protect the rights and interests of customers, and they are liable to ensure for
the customers’ safety and security.  An organization can’t practice unethical
practices by violating the consumer’s rights to make a profit.

There are various deeds such as deceiving advertising, sharing wrong

information with customers, misbehavior with customers, invading customers’
privacy, lack of quality control on the products sold by the organization,
questionable pricing policies, etc. violates the customers’ rights and interests.

3. Conflict of interest between the employees of the organization and retailer:

Conflict of interest occurs when the personal interest of an individual does not

match with the interest of the organization. Employees need to abide by the
laws and rules set by the organization, and on the other hand, retailers must
always take actions which are in favor of their employees or at least doesn’t
violates the employees’ rights and interests.

Various examples of conflicts between employees and employers in retail:

1. Sharing confidential information of employers with the third party without

the consent of the employer.
2. Getting employed by a competitor without relieving current job with the
current employer.
3. Making the use of customer’s information for personal benefit.
4. When an employee provides personal benefits to family members and
friends by making the use of his/her position in the company.

4. Confidentiality:

When employees are employed, they are given access to some confidential
information of the organization. If an employee shares that information with
competitors or with anyone outside the organization, then it is called the
unethical practice.

5. Receiving gifts in exchange of favors:

Employees are usually asked not to receive gifts from the people outside the
organization.People give gifts to employees to make the use of the position of
the employee, and if employees accept expensive gifts, then they might feel
obliged to return the favor. This can also cause conflict between employer and
employee.In the next section, you will learn about the ethical practices
followed in the retail environment. The retailer should practice ethical behavior
towards employees, customers, and investors.