BSBFIN601 Manage

organisational finances
Presentation 1
Introduction to financial management
• Financial Management means planning, organizing, directing
and controlling the financial activities such as procurement and
utilization of funds of the enterprise. It means applying general
management principles to financial resources of the enterprise.
Basic accounting principles
• Accounting is the process and system which an organisation
identifies, records, measures and communicates financial
activities in the form of financial data and information.
Double Entry accounting
• Double-entry accounting is a standard accounting method that
involves recording each transaction in at least two accounts,
resulting in a debit to one or more accounts and a credit to one
or more accounts.
Cash accounting
• Cash accounting tracks the actual money coming in and out of
a business. In cash accounting, if you get an invoice for
something, the cost is not recorded in the businesses books
until the invoice has been paid. Similarly, when you an invoice is
sent to a customer, the sale is not recorded until the money is
received.
Accrual accounting
• Accrual accounting is when you record expenses and sales
when they take place instead of when cash changes hands.
Financial probity
• Probity requires that a business conduct its activities ethically,
honestly and fairly. Elements of a culture that promotes and
demonstrates high standards of probity include, for example,
that expected behaviours are articulated and enforced, that staff
involved in the finance function are skilled, knowledgeable and
experienced, that appropriate checks and balances are in place
and conflict of interest is well understood and strategies are in
place to identify and manage potential issues.
Review financial documents
• Profit and loss statement- A profit and loss report is a useful tool
for monitoring business activity.
• Balance sheet- A balance sheet is a summary of all of your
business assets (what the business owns) and liabilities (what
the business owes). At any particular moment, it shows you how
much money you would have left over if you sold all your assets
and paid off all your debts (i.e. it also shows 'owner's equity’).
• Cash flow statements- A cash flow statement shows how much
cash is moving in and out of your business over a certain period
of time (i.e. it reflects your 'liquidity').
Profit and loss statements
• A profit and loss report is a useful tool for monitoring business
activity. For business owners, it highlights where their business
is succeeding and where it is struggling. Investors will use profit
and loss reports to gauge the financial health of a potential
investment, or to see what kind of return they are getting on an
existing investment.
Set targets for financial performance
• Consider where you want your business to be in the next year
and set targets in line with that.
• Work with your CPA and/ or senior staff to help set targets
relevant to your industry and your business.
• Incorporate targets into your strategic plan, key performance
indicators and budgets.
• To help set targets for performance, look at how other
businesses in your industry perform through industry
benchmarks.
Set targets for financial performance
• Review financial targets against strategic plan and operational
budgets at least quarterly.
• Alter targets where market or other circumstances dictate.
• Consider incorporating non-financial activities in targets, for
example measures of throughput, number of sales calls etc.
• Use visual displays around the work place to ensure all staff are
aware of the key targets and progress against those targets.
Cash flow trends
• Have your cash flow forecast show the projected cash flows for
each month in the 12- month period.
• Address any future cash shortages through increasing cash
sales, collecting outstanding debts, reducing expenses or
through external finance (such as an overdraft facility).
• If you decide to seek external finance for any purpose, go to
your lender as soon as possible.
Regulatory requirements
• Income tax return
• Business Activity Statement (BAS or IAS)
• Australian Securities and Investments Commission annual
report (companies only)
• PAYG withholding payment summary annual report
• Payroll tax
• Workers compensation insurance
• Superannuation payment
Choosing the right software
• When reviewing existing software for its suitability for financial
management, it must be both accurate and appropriate with the
ability to take and forecast the information
• Easy to keep accurate records and all the reports
• Data will be quickly generated and easily accessible
Some examples of financial software
• MYOB
• Xero
• Quick books
• Zoho books