POFM - processes of financial planning and implementation

Question 1

processes of financial management

Answer 1

For financial managers to be effective, they need to follow a number of processes,

Plan and implement financial activities and resources (planning and implementation cycle)

Monitor and control financial activities (by looking at our key financial statements)

Analyse and interpret financial results from the statements for decision making purposes (financial ration analysis)

Question 2

stage 1

Answer 2

asses present financial position

Involves looking at current financial structure and commitments as well as the projects in the strategic plan that require additional financial resources
Important financial information (budgets and forecasts) needs to be collected before future plans can be made.

Question 3

stage 2

Answer 3

determine financial needs
To determine where a business is headed and how it will get there, it is important to know what its needs are

These are dependent on the size, phase of the BLC, future plans, capacity to finance and management skill

It is likely that a business plan will need to be formulated

Once you’ve identified your needs you will go out and source your funding.

Question 4

stage 3

Answer 4

develop budgets
Budgets should be prepared to identify the projected costs and revenue associated with each of the activities outlined in the business plan

Budgets can help to quantify financial needs, provide information for decision making and act as a benchmark for future comparison and analysis

Question 5

stage 4

Answer 5

maintain record systems
All financial transactions of the business need to be recorded accurately and in an accessible manner. This will allow comparison between projected and actual outcomes

Accurate financial data is essential for effective decision making.

Question 6

stage 5

Answer 6

identify financial risks
Businesses need to identify the potential risks that will undermine their financial commitments

can minimise their borrowing costs, not overextend themselves and find a sustainable mix of funding

They also need to be conscious of external economic forces both domestically and globally

Question 7

stage 6

Answer 7

establish financial control

the procedure’s that establishes whether the business is achieving its financial objectives

prevent theft, fraud or inappropriate use of financial resources.

Managers can determine whether the strategy was unsuccessful and if their objectives need
to be reassessed.