[03-Sep-2026 22:42:32 UTC] PHP Fatal error: Trait 'AAM_Core_Contract_ServiceTrait' not found in /home/ogedengbe/public_html/wp-content/plugins/advanced-access-manager/application/Service/LogoutRedirect.php on line 21 [03-Sep-2026 22:42:33 UTC] PHP Fatal error: Trait 'AAM_Core_Contract_SingletonTrait' not found in /home/ogedengbe/public_html/wp-content/plugins/advanced-access-manager/application/Service/Core.php on line 20 [03-Sep-2026 22:42:33 UTC] PHP Fatal error: Trait 'AAM_Core_Contract_ServiceTrait' not found in /home/ogedengbe/public_html/wp-content/plugins/advanced-access-manager/application/Service/AdminMenu.php on line 18 [03-Sep-2026 22:42:33 UTC] PHP Fatal error: Trait 'AAM_Core_Contract_ServiceTrait' not found in /home/ogedengbe/public_html/wp-content/plugins/advanced-access-manager/application/Service/Metabox.php on line 18 [03-Sep-2026 22:42:33 UTC] PHP Fatal error: Trait 'AAM_Core_Contract_ServiceTrait' not found in 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Fatal error: Trait 'AAM_Core_Contract_ServiceTrait' not found in /home/ogedengbe/public_html/wp-content/plugins/advanced-access-manager/application/Service/DeniedRedirect.php on line 18 [03-Sep-2026 22:42:34 UTC] PHP Fatal error: Trait 'AAM_Core_Contract_RequestTrait' not found in /home/ogedengbe/public_html/wp-content/plugins/advanced-access-manager/application/Service/SecureLogin.php on line 19 [03-Sep-2026 22:42:34 UTC] PHP Fatal error: Trait 'AAM_Core_Contract_SingletonTrait' not found in /home/ogedengbe/public_html/wp-content/plugins/advanced-access-manager/application/Service/Compatibility.php on line 21 Finance & accounting – OGEDENGBE BLESSING & CO https://ogedengbeblessing.com Audit And Accounting Firm Sun, 22 Sep 2019 13:56:49 +0000 en-US hourly 1 https://ogedengbeblessing.com/wp-content/uploads/2019/09/favicon22.gif Finance & accounting – OGEDENGBE BLESSING & CO https://ogedengbeblessing.com 32 32 Cash Handling Roles & Responsibilities https://ogedengbeblessing.com/2016/10/21/cash-handling-roles-responsibilities/ https://ogedengbeblessing.com/2016/10/21/cash-handling-roles-responsibilities/#respond Fri, 21 Oct 2016 03:48:57 +0000 https://bearsthemespremium.com/theme/consulta/?p=1881 Department Level

Department Cash Handling Role Administrator

Policy:  Required Role
This person can be the Department Administrator (DA) or any other individual deemed appropriate by the Business Officer.  We recommend that this person be someone different than any of the individuals in the other roles.  However, if no other option is available, we strongly recommend that role overlap is limited to only the Local Cash Handling Control Manager or Cash Collection Point Supervisor. Overlap with other roles will be allowed if necessary provided the assignments are in compliance with the role overlap restrictions described below.

Description of Role

  • Maintain timely, accurate & effective communication with all local cash handling control managers in the department.
  • Update cash handling roles for all payment receipt locations at the sub-department level in a timely and accurate manner.

Audit Control:  None.  If role overlap is necessary, we strongly recommend that it is limited to only the Local Cash Handling Control Manager & Cash Collection Point Supervisor.

Sub-department Level

I. Local Cash Handling Control Manager

Policy:  Required Role
We recommend that this person be someone different than any of the individuals in the roles. However, if no other option is available, it may be the same person as the Cash Collection Point Supervisor.

Description of Role

  • Maintain strong internal controls for payment collections at the payment receipt location level and safeguarding against loss.
  • Annually, review local cash handling procedures and update as needed. At a minimum, resubmits procedures every 3 years to AFR for approval.
  • Notify the Departmental Cash Handling Role Administrator of staff role changes so Institutional Roles-Cash Handling can be updated.

Audit Control:  No overlap in roles except with Departmental Cash Handling Role Administrator & Cash Collection Point Supervisor.

II. Biller

Policy:  Optional Role
We recommend that this person be a different individual than any of the other roles.  However, if no other option is available, it may be the same person as Reconciler.

Description of Role

  • Create and send invoices.
  • Record sales as appropriate.
  • Update the accounts receivable system.

Audit Control:  No overlap in roles except with Reconciler.

III. Cash Collection Point Cashier

Policy: Required Role
We recommend that this person be a different individual than any of the other roles.  However, if no other option is available, it may be the same person as Deposit Preparer.

Description of Role

  • Conduct cash transactions with customers
  • Provide a receipt to customer paying in person.
  • Endorse all checks immediately upon receipt with a restrictive University of Iowa endorsement.
  • Enter transactions into accounts receivable system, cash register or cash receipt journal/log.
  • Count the cash and submit the cash & supporting documentation to the Cash Collection Point Supervisor at the end of their shift.

Audit Control:  No overlap in roles except with Deposit Preparer.

IV. Cash Collection Point Supervisor

Policy: Optional Role
We recommend that this person be a different individual than any of the other roles.  However, if no other option is available, it may be the same person as Local Cash Handling Control Manager.

Description of Role

  • Monitor cash receipting functions.
  • Authorize various transactions, such as refunds, voids, and cash drawer reconciliations.

Audit Control:  No overlap in roles except with Departmental Cash Handling Role Administrator & Local Cash Handling Control Manager.

V. Deposit Preparer

Policy: Required Role
We recommend that this person be a different individual than any of the other 5 roles.  However, if no other option is available, it may  be the same person as Cash Collection Point Cashier.

Description of Role

  • Retrieve & count cash receipts from the business day.
  • Prepare the deposit.
  • Store the cash in a secure location until it is deposited.
  • Deliver deposit to the bank or designated deposit drop location.
  • Submit accounting information through the eDeposit system within 3 working days of the bank deposit.
  • Deliver each validated deposit slip/eDeposit form to the Reconciler.

Audit Control:  No overlap in roles except with Cash Collection Point Cashier.

VI. Reconciler

Policy: Required Role
We recommend that this person be a different individual than any of the other roles.  However, if no other option is available, it may be the same person as Biller.

Description of Role

  • Verify that the Deposit Preparer has deposited all cash received.
  • Reconcile eDeposit forms to the supporting documentation and to the Transaction Detail Report (TDR).
  • Cannot have access to the cash at any point, i.e., cash drawer or box, safe.

Audit Control:  No overlap in roles except Biller.

]]> https://ogedengbeblessing.com/2016/10/21/cash-handling-roles-responsibilities/feed/ 0 The Objectives And Characteristics Of Financial Reporting https://ogedengbeblessing.com/2016/10/21/the-objectives-and-characteristics-of-financial-reporting/ https://ogedengbeblessing.com/2016/10/21/the-objectives-and-characteristics-of-financial-reporting/#respond Fri, 21 Oct 2016 03:46:57 +0000 https://bearsthemespremium.com/theme/consulta/?p=1879
The overarching objective of financial reporting, which includes the production and dissemination of financial information about the company in the form of financial statements, is to provide useful information to investors, creditors, and other interested parties. Ideally, accounting information provides company shareholders and other stakeholders (e.g., employees, communities, customers, and suppliers) with information that aids in the prediction of the amounts, timing, and uncertainty of future cash flows. In addition, financial statements disclose details concerning economic resources and the claims to those resources.

In recent years, there has been a growing demand on the part of stakeholders for information concerning the social impacts of corporate decision making. Increasingly, companies are including additional information about environmental impacts and risks, employees, community involvement, philanthropic activities, and consumer safety. Much of the reporting of such information is voluntary, especially in the United States.

In addition, quantitative data are now supplemented with precise verbal descriptions of business goals and activities. In the United States, for example, publicly traded companies are required to furnish a document commonly identified as “management’s discussion and analysis” as part of the annual report to shareholders. This document summarizes historical performance and includes forward-looking information.

To accountants, the two most important characteristics of useful information are relevance and reliability. Information is relevant to the extent that it can potentially alter a decision. Relevant information helps improve predictions of future events, confirms the outcome of a previous prediction, and should be available before a decision is made. Reliable information is verifiable, representational faithful, and neutral. The hallmark of neutrality is its demand that accounting information not be selected to benefit one class of users to the neglect of others. While accountants recognize a trade off between relevance and reliability, information that lacks either of these characteristics is considered insufficient for decision making.

In addition to being relevant and reliable, accounting information should be comparable and consistent. Comparability refers to the ability to make relevant comparisons between two or more companies in the same industry at a point in time. Consistency refers to the ability to make relevant comparisons within the same company over a period of time.

In general, financial reporting should satisfy the full disclosure principle—meaning that any information that can potentially influence an informed decision maker should be disclosed in a clear and understandable manner on the company’s financial statement.

Company Financial Statements

The primary output of the financial accounting system is the annual financial statement. The three most common components of a financial statement are the balance sheet, the income statement, and the statement of cash flows. In some jurisdictions, summary financial statements are available (or may be required) on a quarterly basis. These reports are usually sent to all investors and others outside the management group. Some companies post their financial statements on the Internet, and in the United States the financial reports for public corporations can be obtained from the Securities and Exchange Commission (SEC) through its website. The preparation of these reports falls within a branch of accounting known as financial accounting.

The balance sheet

A balance sheet describes the resources that are under a company’s control on a specified date and indicates where these resources have come from. As an overview of the company’s financial position, the balance sheet consists of three major sections: (1) the assets, which are probable future economic benefits owned or controlled by the entity; (2) the liabilities, which are probable future sacrifices of economic benefits; and (3) the owners’ equity, calculated as the residual interest in the assets of an entity after deducting liabilities.

The list of assets shows the forms in which the company’s resources are lodged; the list of liabilities and the owners’ equity indicate where these same resources have come from. The balance sheet, in other words, shows the company’s resources from two points of view—asset and liability—and the following relationship must be maintained: total assets are equal to total liabilities plus total owners’ equity.

This same identity is also expressed in another way: total assets minus total liabilities equals total owners’ equity. In this form, the equation emphasizes that the owners’ equity in the company is always equal to the net assets (assets minus liabilities). Any increase in one will inevitably be accompanied by an increase in the other, and the only way to increase the owners’ equity is to increase the net assets. This is known as the fundamental accounting equation.

Assets are ordinarily subdivided into current assets and noncurrent assets. The former include cash, amounts receivable from customers, inventories, and other assets that are expected to be consumed or can be readily converted into cash during the next operating cycle (production, sale, and collection). Noncurrent assets may include noncurrent receivables, fixed assets (such as land and buildings), intangible assets (such as intellectual property), and long-term investments.

The liabilities are similarly divided into current liabilities and noncurrent liabilities. Most amounts payable to the company’s suppliers (accounts payable), to employees (wages payable), or to governments (taxes payable) are included among the current liabilities. Noncurrent liabilities consist mainly of amounts payable to holders of the company’s long-term bonds and such items as obligations to employees under company pension plans. The difference between total current assets and total current liabilities is known as net current assets, or working capital.

]]> https://ogedengbeblessing.com/2016/10/21/the-objectives-and-characteristics-of-financial-reporting/feed/ 0 Audit evidence and the objectives of an audit https://ogedengbeblessing.com/2016/10/21/audit-evidence-and-the-objectives-of-an-audit/ https://ogedengbeblessing.com/2016/10/21/audit-evidence-and-the-objectives-of-an-audit/#respond Fri, 21 Oct 2016 03:44:17 +0000 https://bearsthemespremium.com/theme/consulta/?p=1877 The main objective of the work performed by the auditor in an audit engagement is that of obtaining reasonable assurance as to whether the financial statements, as a whole, are free from material misstatement, so that the auditor is able to express an opinion on the financial statements and report accordingly in the auditor’s report.

To obtain reasonable assurance about the financial statements, which is a high but not absolute level of assurance, the auditor needs to design and perform audit procedures to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor’s opinion.

ISA (UK and Ireland) 500, Audit Evidence, explains what are the auditor’s responsibilities in obtaining audit evidence that can underpin the auditor’s opinion and what constitutes sufficient appropriate audit evidence for such purpose.

Sufficient appropriate audit evidence

A large part of the work involved in the performance of an audit consists of obtaining and evaluating audit evidence, which is primarily derived from audit procedures carried out during the course of the engagement, but that can also be gained from other sources. For example sources  like previous audits; provided that changes occurred in the meantime have been carefully taken into account; or the firm’s quality control procedures, especially around client acceptance and continuance.

Audit procedures that are used to obtain audit evidence are various and are often applied in combination. They can include inspection, observation, confirmation, recalculation, reperformance and analytical procedures, in addition to inquiry, as the latter does not normally provide sufficient audit evidence on its own.

However, audit evidence obtained will only be useful in reducing to an acceptably low level the risk that the auditor could express an inappropriate opinion when the financial statements are materially misstated and, therefore, allow the auditor to draw reasonable conclusions, when it is sufficient and appropriate to the circumstances.

Sufficiency and appropriateness of audit evidence are two qualities that are interrelated. Sufficiency is the measure of the quantity of audit evidence. The quantity of audit evidence needed is affected by the risks of misstatement assessed by the auditor, whereby the higher the risks the more audit evidence required, and by the quality of the evidence, where the higher the quality the less evidence perhaps required. A large amount of audit evidence may, however, not compensate for its poor quality.

Appropriateness is the measure of the quality of audit evidence. The quality of audit evidence depends on whether it is relevant and reliable in providing support to the conclusions on which the auditor’s opinion is based. Whether evidence is reliable also depends on its source; for instance, whether it is generated by the client, a third party or the auditor; and also from its nature, whereby documentary evidence is normally more reliable than verbal evidence.

Whether the audit evidence obtained in the course of an engagement is sufficient and appropriate to support the auditor’s opinion is a matter of professional judgment that the auditor needs to establish. Professional judgment is not, however, an abstract and subjective category of the auditor’s frame of mind, and should be informed by a structured approach to gathering evidence that is based on the assessed risks of material misstatement of the financial statements.

Designing and performing audit procedures for obtaining audit evidence

A number of ISAs (UK and Ireland), namely ISA 300, ISA 315 and ISA 330, require and explain that audit evidence should be obtained by performing risk assessment procedures and further audit procedures. Further audit procedures include tests of controls and substantive procedures, including tests of details and substantive analytical procedures.

In particular, alongside an overall audit strategy that indicates the scope of the work, the resources of staff allocated to specific areas and the timing of the engagement, a more detailed audit plan should indicate the audit procedures to be performed in respect of specific assertions in the financial statements and their timing.

The results of the initial risk assessment procedures, like the entity’s business risk assessment or the assessment of internal controls, are the basis on which to design the nature, timing and extent of further audit procedures to be performed in respect of the risks identified.

Further audit procedures should respond to the assessed risks of material misstatement at the assertion level, so that sufficient appropriate evidence can be obtained in respect of those risks.

The detailed audit plan records the risk assessment procedures and the further audit procedures at the assertion level in response to the assessed risks. The audit plan describes the nature, extent and timing of the audit procedures to be performed by team members in respect of specific classes of transactions, account balances and disclosures. In the case of an audit of a small entity, the audit plan would normally be included in standard audit programmes and schedules used for the various transactions and account balances. In any case, the standard programmes need to be tailored so that the approach to an item, in terms of the use of substantive procedures, tests of controls or both, is proportional to the risk assessed for that item and is directed at obtaining audit evidence capable of verifying the underlying assertions.

The audit evidence generated by the planned audit procedures should be sufficient and appropriate to support and corroborate, or to contradict, the management’s assertions in respect of specific classes of transactions, account balances or disclosures in the financial statements.

Audit procedures in respect of specific items in the financial statements should be designed with the objective of providing evidence capable of verifying the assertions embodied in an item, so that the auditor can draw a reasonable conclusion about that item. Audit evidence and the auditor’s conclusions in respect of the various assertions tested contribute to the overall audit evidence on which the auditor’s opinion is based.

]]> https://ogedengbeblessing.com/2016/10/21/audit-evidence-and-the-objectives-of-an-audit/feed/ 0 Reasons for Auditing Cash https://ogedengbeblessing.com/2016/10/21/reasons-for-auditing-cash/ https://ogedengbeblessing.com/2016/10/21/reasons-for-auditing-cash/#respond Fri, 21 Oct 2016 03:39:43 +0000 https://bearsthemespremium.com/theme/consulta/?p=1873 Cash auditing is a complete or partial assessment of cash transactions that your business carries out within a set time frame. You may audit cash to ensure proper documentation of cash received or disbursed and to establish that the cash balance and deposits are accurate. A cash audit is a review of cash transactions between an identified start date and end date in accordance with the generally accepted procedures of accounting, in addition to the policies of your company.

Disclosure

Cash audits ensure that you clearly and appropriately name and categorize cash when making a financial statement, including lines of credit and loan guarantees, in order to enable easy verification of cash balances. For example, you should report cash on deposit as a current asset while displaying a bank overdraft as a current liability. Thus, an audit will help you understand how the business is performing financially and avoid misappropriation of funds.

Authenticity

Businesses conduct cash audits to ensure that cash balances exist in line with the dates they are reported on the balance sheet, and in the long run, this can help you make better business decisions. Records must show existing items to reassure you of their dependability and a cash audit exposes non-existent items and unreliable records. Many times, you will make decisions based on the data you analyze from financial documents, so entries need to be authentic.

Accuracy

Cash audits help to obtain and verify the mathematical accuracy of cash transactions by tracing opening balances to the previous year’s documents and by reviewing activity in general ledger accounts for cash. An audit helps to expose errors such as kiting, where you may record deposits and omit withdrawals, causing an overstatement of cash. You must ensure that you record realizable cash balances in the amounts you state on your balance sheet.

Completeness

To ascertain that all records reflect the expenditure in the financial statements, an auditor may examine cash receipts and disbursement records for a period before the balance sheet date. This prevents deliberate misstatement of fact and establishes errors committed by the person handling the records. Misstatement of fact may occur for many reasons, such as to conceal poor decisions or fraudulence. The auditor’s intention may not be to identify fraud, but in the course of the audit, he may uncover it and save your business from theft.

Cut-off Dates

You may also audit cash to establish the cut-off dates of accounts by reconciling balances and tracing the reconciled items with the aid of supporting documentation. For instance, if the transaction is at a date other than the end of the period, reconcile the activity to the date of the balance sheet. A cash audit provides evidence that transactions for each year are included in the financial statements of the appropriate year.

]]> https://ogedengbeblessing.com/2016/10/21/reasons-for-auditing-cash/feed/ 0 Audit Procedures to Detect Fraud https://ogedengbeblessing.com/2016/08/23/audit-procedures-to-detect-fraud/ https://ogedengbeblessing.com/2016/08/23/audit-procedures-to-detect-fraud/#respond Tue, 23 Aug 2016 10:20:17 +0000 https://bearsthemespremium.com/theme/consulta/?p=263 While audits are not designed to root out every instance of fraud, auditors have a responsibility to detect material misstatements in the company’s financial statements caused by either fraud or error. Accordingly, generally accepted auditing principles prescribe specific audit procedures to detect fraud that must be carried out during each audit. Knowing some of these procedures can help you better align resources for your company’s audit.

Fraud Brainstorming Session

Under generally accepted auditing standards, audit engagement teams must hold a fraud brainstorming session at the beginning of the audit. This session, led by the partner in charge of the audit, is designed to provide a time for the audit team to consider how the company could commit fraud. Further, the brainstorming meeting is used to set a tone of professional skepticism in the audit. Often, a fraud specialist attends the meeting to provide insight into other frauds committed by similar companies or industries and help identify the client’s risk factors.

Journal Entry Testing

Because committing material financial statement fraud often requires adjustments to the company’s financial records, auditors will test the company’s journal entries for any signs of manipulation. To perform this test, after gaining an understanding of the company’s controls and procedures, the auditor will make a selection from the company’s journal entries. Auditors typically select entries that are large, made by upper management, posted late in the accounting period or otherwise of interest. Once the selections have been made, the auditor will ask for supporting documentation that validates each entry.

Accounting Estimates

Another likely place for fraud is in accounting estimates. Because accounting estimates are subjective, management may be able to influence accounting estimates to manipulate the financial statements. Auditors look for fraud in accounting estimates in two major manners. First, auditors complete a “lookback” procedure to determine if the methodology for completing accounting estimates has changed from the prior year. Changes in methodology could be a sign of manipulation. Auditors also examine the directionality of estimates as a whole. For example, if nearly all estimates in the prior year were of decreasing income and nearly all estimates in the current year were of increasing income, auditors may be concerned that the company is shifting income from one period to another.

Significant Unusual Transactions

Recent revisions in generally accepted auditing principles require that auditors closely examine significant unusual transactions outside of a company’s normal business operations. This examination requires companies to explain the purpose and business rationale for the transaction. Once the auditor obtains management’s explanation, the engagement team should corroborate management’s response with other information received during the audit.

]]> https://ogedengbeblessing.com/2016/08/23/audit-procedures-to-detect-fraud/feed/ 0 The Role of the Finance Function in Organizational Processes https://ogedengbeblessing.com/2016/08/23/the-role-of-the-finance-function-in-organizational-processes/ https://ogedengbeblessing.com/2016/08/23/the-role-of-the-finance-function-in-organizational-processes/#respond Tue, 23 Aug 2016 10:18:39 +0000 https://bearsthemespremium.com/theme/consulta/?p=261 The Finance Function and the Project Office

Contemporary organizations need to practice cost control if they are to survive the recessionary times. Given the fact that many top tier companies are currently mired in low growth and less activity situations, it is imperative that they control their costs as much as possible. This can happen only when the finance function in these companies is diligent and has a hawk eye towards the costs being incurred. Apart from this, companies also have to introduce efficiencies in the way their processes operate and this is another role for the finance function in modern day organizations.

There must be synergies between the various processes and this is where the finance function can play a critical role. Lest one thinks that the finance function, which is essentially a support function, has to do this all by themselves, it is useful to note that, many contemporary organizations have dedicated project office teams for each division, which perform this function.

In other words, whereas the finance function oversees the organizational processes at a macro level, the project office teams indulge in the same at the micro level. This is the reason why finance and project budgeting and cost control have assumed significance because after all, companies exist to make profits and finance is the lifeblood that determines whether organizations are profitable or failures.

The Pension Fund Management and Tax Activities of the Finance Function

The next role of the finance function is in payroll, claims processing, and acting as the repository of pension schemes and gratuity. If the US follow the 401(k) rule and the finance function manages the defined benefit and defined contribution schemes, in India it is the EPF or the Employee Provident Funds that are managed by the finance function. Of course, only large organizations have dedicated EPF trusts to take care of these aspects and the norm in most other organizations is to act as facilitators for the EPF scheme with the local or regional PF (Provident Fund) commissioner.

The third aspect of the role of the finance function is to manage the taxes and their collection at source from the employees. Whereas in the US, TDS or Tax Deduction at Source works differently from other countries, in India and much of the Western world, it is mandatory for organizations to deduct tax at source from the employees commensurate with their pay and benefits.

The finance function also has to coordinate with the tax authorities and hand out the annual tax statements that form the basis of the employee’s tax returns. Often, this is a sensitive and critical process since the tax rules mandate very strict principles for generating the tax statements.

Payroll, Claims Processing, and Automation

We have discussed the pension fund management and the tax deduction. The other role of the finance function is to process payroll and associated benefits in time and in tune with the regulatory requirements.

Claims made by the employees with respect to medical, and transport allowances have to be processed by the finance function. Often, many organizations automate this routine activity wherein the use of ERP (Enterprise Resource Planning) software and financial workflow automation software make the job and the task of claims processing easier. Having said that, it must be remembered that the finance function has to do its due diligence on the claims being submitted to ensure that bogus claims and suspicious activities are found out and stopped. This is the reason why many organizations have experienced chartered accountants and financial professionals in charge of the finance function so that these aspects can be managed professionally and in a trustworthy manner.

The key aspect here is that the finance function must be headed by persons of high integrity and trust that the management reposes in them must not be misused. In conclusion, the finance function though a non-core process in many organizations has come to occupy a place of prominence because of these aspects.

]]> https://ogedengbeblessing.com/2016/08/23/the-role-of-the-finance-function-in-organizational-processes/feed/ 0 Why Is Financial Management So Important in Business? https://ogedengbeblessing.com/2016/08/23/why-is-financial-management-so-important-in-business/ https://ogedengbeblessing.com/2016/08/23/why-is-financial-management-so-important-in-business/#respond Tue, 23 Aug 2016 10:12:43 +0000 https://bearsthemespremium.com/theme/consulta/?p=257 Financial management is one of the most important responsibilities of owners and business managers. They must consider the potential consequences of their management decisions on profits, cash flow and on the financial condition of the company. The activities of every aspect of a business have an impact on the company’s financial performance and must be evaluated and controlled by the business owner.

Life Cycles of a Business

Most companies experience losses and negative cash flows during their startup period. Financial management is extremely important during this time. Managers must make sure that they have enough cash on hand to pay employees and suppliers even though they have more money going out than coming in during the early months of the business. This means the owner must make financial projections of these negative cash flows so he has some idea how much capital will be needed to fund the business until it becomes profitable.

As a business grows and matures, it will need more cash to finance its growth. Planning and budgeting for these financial needs is crucial. Deciding whether to fund expansion internally or borrow from outside lenders is a decision made by financial managers. Financial management is finding the proper source of funds at the lowest cost, controlling the company’s cost of capital and not letting the balance sheet become too highly leveraged with debt with an adverse effect of its credit rating.

Financial Management in Normal Operations

In its normal operations, a company provides a product or service, makes a sale to its customer, collects the money and starts the process over again. Financial management is moving cash efficiently through this cycle. This means that managing the turnover ratios of raw materials and finished goods inventories, selling to customers and collecting the receivables on a timely basis and starting over by purchasing more raw materials.

In the meantime, the business must pay its bills, its suppliers and employees. All of this must be done with cash, and it takes astute financial management to make sure that these funds flow efficiently.

Even though economies have a long-term history of going up, occasionally they will also experience sharp declines. Businesses must plan to have enough liquidity to weather these economic downturns, otherwise they may need to close their doors for lack of cash.

Reporting on Business Operations

Every business is responsible for providing reports of its operations. Shareholders want regular information about the return and security of their investments. State and local governments need reports so that they can collect sales tax. Business managers need other types of reports, with key performance indicators, which measure the activities of different parts of their businesses.

As well, a comprehensive financial management system is able to produce the various types of reports needed by all of these different entities.

Filing and Paying Taxes

The government is always around to collect taxes. Financial management must plan to pay its taxes on a timely basis.

Financial management is an important skill of every small business owner or manager. Every decision that an owner makes has a financial impact on the company, and he has to make these decisions within the total context of the company’s operations.

]]> https://ogedengbeblessing.com/2016/08/23/why-is-financial-management-so-important-in-business/feed/ 0 Three Fundamental Laws Of Success in Financial Management https://ogedengbeblessing.com/2016/08/23/three-fundamental-laws-of-success-in-financial-management/ https://ogedengbeblessing.com/2016/08/23/three-fundamental-laws-of-success-in-financial-management/#respond Tue, 23 Aug 2016 10:09:54 +0000 https://bearsthemespremium.com/theme/consulta/?p=255 Everyone knows how to be healthy:  Eat Right, Exercise, and maintain positive mental health (sleep, stress, etc.).  Very few people know the three keys to financial success, but they are equally as simple, and, after you read them, they will be perfectly obvious.

There are three things required for financial success.  It does not matter if you are an individual, a family, a business, a non-profit, or a government, there are only three things you need to be a financial success.  Best of all, they are simple.

Today In: Entrepreneurs

1.Make more money than you spend

2.Invest the difference

3.Understand where you are and where the money is going

Rule #1: Make more money than you spend

This is obvious.  But, we have all had times in our lives when we probably spent more money than we were making.  Unfortunately, most Americans do this all the time.  The evidence is staggering and most people are in credit card debt because they cannot seem to follow this first basic rule.

The real problem is, that this (over-spending or under-earning) cannot go on forever.  There will come a time when the borrowing will run out, when your investors will no longer fund a money-losing enterprise, when your parents will cut you off, something happens that brings this imbalance to an end…and so you change.

You adapt, and, as individuals, we rarely lose our cars, have our televisions repossessed, or, worse, become homeless.

Individuals understand this better than businesses, and business understands this concept better than governments.  Somehow, when it is your money, it is very serious.  Yet, small business owners, who start businesses with their life savings (according to some studies as much as 77 percent of small business owners invest their entire net worth in their business), sometimes fail to understand rule number one and run out of cash.

Why does that happen?  Take a look at rule number three.

Rule #2:  Invest the difference

As an individual, this is easy to understand, but very hard to do.  Fewer than 7 percent of Americans are automatically investing on a monthly basis.  Business owners do a better job.  They understand that in order to grow their business, they need to purchase new equipment, invest in training programs, and hire new people.

The problem for small business owners exists when they start with Rule #2 rather than starting with Rule #1.  In it’s most obvious terms, you cannot invest what you do not have to begin with.  In many business circles, this is referred to as the “chicken and egg” problem.  Which comes first, the investment that generates the profits, or the profits that generate the cash for investment?

I will argue that in most cases, this is not really a valid argument.  At some point in history, someone, in your business (or a business like yours) scraped together enough money, investors, loans, etc. to start their business and get to profitability.  The focus must be on a minimum investment (which comes first) in order to get to profitability as fast as possible.  So, investment comes first (in business), but it must be tempered by  a mad dash to profitability.

Rule #3:  Understand where you are and where the money is going

The number one reason for our nation’s sky high divorce rate is not a cheating spouse, but stress about family finances.  As a business owner, I can handle successes.  I can also handle problems and trouble.  What causes me stress is the unknown.  When I get surprised by something, I get stressed, and then it gets worse, I start worrying about what else I am missing.  Stress causes me to make bad decisions, become irritable, sleep poorly, and generally live a miserable life.

Tracking your individual income and expenses along with your personal balance sheet (what you own minus what you owe) will eliminate much of the stress about your personal finances.  Additionally, keeping close track of your Company’s income and expenses and your Company’s balance sheet will cut down on your stress at the office.  Most importantly, knowing the numbers allows you to make good decisions.

Good decisions make you money.  Good decisions lower stress levels, and good decisions make life fun.

While they are obvious and incredibly simple, I am constantly amazed at how few people follow these simple rules.  If you want to be different, if you want to be successful, and if you want to reduce your stress, follow these three rules in everything you do.

]]> https://ogedengbeblessing.com/2016/08/23/three-fundamental-laws-of-success-in-financial-management/feed/ 0 How to set and achieve your profit targets https://ogedengbeblessing.com/2016/08/23/how-to-set-and-achieve-your-profit-targets/ https://ogedengbeblessing.com/2016/08/23/how-to-set-and-achieve-your-profit-targets/#respond Tue, 23 Aug 2016 10:07:38 +0000 https://bearsthemespremium.com/theme/consulta/?p=251

You’re in business to make profits, so that’s where you should start when making a plan for the coming year.

A specific profit target can be a powerful catalyst for improvement throughout your company. A minimum goal to start should be to attain the average profitability for your industry. Then you can reach higher.

Here’s how entrepreneurs can set and achieve a profit goal.

Determine a targeted return on invested capital

To calculate this number, divide forecasted net profit by total capital (long-term debt plus shareholder equity).

Calculate the gross profit margin you will need to achieve this profit goal

Take your projected net profit and add forecasted selling, general and administrative expenses. This will give you a forecasted gross profit margin. In coming up with your expense projection, plan to keep a tight rein on costs, but remember you might want to beef up selling and marketing spending to deliver more revenue and help achieve your goals.

Calculate the difference between your targeted gross profit margin and last year’s actual gross margin

The gap between these two numbers is what you have to make up through a combination of higher sales, increased labour productivity and improved material utilization.

Prepare a sales forecast by month and product line

Use the exercise as an opportunity to contact your customers to ask about their purchasing intentions. Then, estimate the sales you expect to receive from customers and the sales you will need to generate through a marketing and sales program.

Forecast cost of goods sold

Use last year’s numbers for labour, material and overhead and then adjust to account for planned improvements.

Meet with your management team and develop a plan

Here’s where you and your team agree on specific actions to boost sales, improve labour productivity and tighten supply and expense management. Make department heads responsible for delivering in their areas. Make sure to take a close look at your pricing and inventory management. Are you charging customers enough? Are you working to increase sales of your highest margin items and focusing on either boosting your margin on laggards or eliminating them?

Execute. Execute. Execute.

Closely monitor your progress in implementing the items in your action plan and adjust as necessary through the year.

It’s essential to seek out and listen to the input from your employees when looking for innovative ways to improve your business and achieve goals. Make sure the employees know you want their ideas.

]]> https://ogedengbeblessing.com/2016/08/23/how-to-set-and-achieve-your-profit-targets/feed/ 0 5 financial indicators every entrepreneur should monitor https://ogedengbeblessing.com/2016/08/23/5-financial-indicators-every-entrepreneur-should-monitor/ https://ogedengbeblessing.com/2016/08/23/5-financial-indicators-every-entrepreneur-should-monitor/#respond Tue, 23 Aug 2016 09:58:17 +0000 https://bearsthemespremium.com/theme/consulta/?p=249

Proper financial management is crucial because it allows you to make timely, well-informed decisions in response to changing conditions.

Surprisingly, many entrepreneurs look at financial reports only at year-end or even a few months later when financial statements become available. That lack of attention is putting their business at risk, says Jorge Henao, a BDC Business Consultant specialized in financial management and strategy.

Review your indicators every month

You have to be disciplined in reviewing financial data at least on a monthly basis and conducting more thorough analysis every quarter, Henao says.

You want to compare your company’s performance to objectives set out at the beginning of the year, based on a long-term strategic plan. You then make adjustments as necessary throughout the year to accomplish the objectives.

“You want to make decisions at the right time,” he says, “If you wait until year end to address issues, it will probably be too late.”

5 key indicators

Henao says key financial indicators fall into these categories:

  • Growth—Are your sales and profits increasing or decreasing year-over-year? Is there a trend?
  • Profitability—Is your business making enough profit compared to other similar companies?
  • Liquidity—Can the company meet its short-term obligations?
  • Leverage—Is the company taking advantage of financing to operate and grow?
  • Activity—Are you managing the assets of the company effectively?

Moreover, it’s critical for entrepreneurs to project and monitor cash flow, Henao adds. Even a company that is generating profits can quickly find itself in trouble if it doesn’t have enough cash to operate. Thus, you should know your financing needs in advance in order to manage your business proactively.

“If the business is growing, you are most likely going to require financing for receivables, inventory, machinery and equipment to hire more people, etc. If you wait until you need the funds, you’re putting the company in jeopardy.”

Benchmark your financial performance

Henao recommends that entrepreneurs benchmark the financial performance of their business against that of similar companies in the same industry. Results that are below the average may highlight areas for improvement.

For instance, a subpar gross profit margin might indicate faulty pricing based on an inaccurate reading of costs. To solve the situation, you will likely have to reduce costs, increase prices or a combination of the two.

“Entrepreneurs often work on intuition,” Henao says. “But having the right information at the right time will help entrepreneurs make more educated decisions.”

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