Financial management objectives give an overview of how an organization will allocate and monitor its income, expenditures and assets. Typically, financial management objectives are used to create practical policies and procedures. Proven ability to meet your objectives is a sign of good practice and a reputable business.
Budget Creation and Management
One of the main objectives of financial management is to create, and stick to, a budget. This is imperative if you are going to make a profit in business. Budget projections should be tailored to fit in with the organization’s financial year and should be regularly reviewed. Financial resources should only be used for the purposes that have been set out in the budget and expenditures should be monitored to ensure that departments across the company are keeping to their allocated funds.
Financial management objectives should include aims for your organization’s income. For example, all income (both cash and bank credits) should be properly recorded and banked and invoices should be raised in a timely manner with clear recovery action policies in place for overdue accounts or payment failure. Once your income objectives have been created, you need to develop policies and procedures to allow the objectives to be met.
Financial management objectives should include systems of accountability for finances. The best way to achieve this is to appoint authorized personnel who have to approve all transactions (typically by signing a document) before the funds can be released. This makes it easier to trace financial irregularities in the accounts to a specific individual or department who may simply have mistakenly entered figures or, in more extreme cases, might be embezzling funds. For larger organizations, accountability-related objectives include having an annual audit of accounts. Audits are typically undertaken by an external organization and, for some businesses, are a legal requirement.
To be comprehensive, financial management should not just focus on the tangible annual income and expenditure, but should include the organization’s assets as well. Consequently, one financial management objective should be to keep accurate and up-to-date records of all items of value, such as furniture and vehicles. It should also be made clear who has ownership and responsibility for these assets; for example, an organization might not have ownership of its office building but it might be responsible for its upkeep for the duration of the lease. Allowances for the maintenance of assets should be included in the budget.