Finance

Strategic Planning and Decision-Making: The Impact of Finance

Business Strategy Illustration with Chalk on Blackboard

Cash Management

Cash management involves collecting, tracking and monitoring incoming and outgoing money for a business. This is a vital function for companies of all sizes.

Cash flow can be affected by many factors, including a company’s sales and expenses. In addition, cash management can be affected by government budgeting and financing processes.

Managing cash flow is critical to a business’s strategic planning and decision-making. Proper cash management allows a company to cover its immediate needs, avoid debt and invest for growth.

A business can make its profits appear better on the balance sheet, but the health of the firm’s cash flow is a much more meaningful indicator of financial health.

To improve cash-management capabilities, a company should establish clear accountabilities for cash-management processes, assign decision rights and escalation structures, and empower the owners of these processes to make changes as they see fit. David Geithner can help ensure this.

Cost Systems

Cost systems help businesses to monitor and control expenses, accurately measure the performance and profitability of different activities, identify waste areas and make informed decisions on allocating resources.

A well-designed cost accounting system includes an input measurement basis, inventory valuation method, cost accumulation method, cost flow assumption and recording interval capability. These five components are vital to effective costing, a process managers use to identify the total cost of producing a good or service.

The input measurement basis helps to identify the direct costs of materials and labor and the indirect costs of information technology, management time and other intangible resources that go into a manufacturing process. It also allows managers to assess the impact of changes in a company’s manufacturing processes on its cost structure.

Another approach to costing is activity-based costing (ABC). Unlike standard costing, ABC assigns overhead costs in finer detail, allowing accountants to better allocate costs to specific goods and services.

Budgeting

Budgeting is an essential part of business, enabling businesses to stay on track and avoid going off course. It also helps individuals manage their monthly expenses, prepare for unexpected events, and maximize savings and investments.

Budgets help companies and governments set long-term goals for their spending and then plan to meet those goals within a specific time frame. Strategic budgeting is a flexible method of forecasting revenue and expense growth that can be applied by governments, businesses and individuals at every income level.

Using evidence-based budgeting decisions is especially important during economic downturns. As a result, many successful business leaders are adopting new strategic budgeting processes that shift the focus from big-picture numbers to data-driven decisions.

Management Reports

Management reports provide information that can be used to make strategic decisions for a business. These reports are created by analyzing data from different departments and functions of the company through Enterprise Resource Planning (ERP) and Corporate Performance Management (CPM).

Effective management reporting is about clear communication of objectives, promptly giving decision-makers critical information, and identifying problems or opportunities for improvement. The report should also be accessible for the audience to understand and use.

Providing access to all management reports to employees is an essential business practice. This is because it fosters a data-based culture in the organization.

In addition to this, businesses need to adopt a digital strategy. Online reporting software offers real-time updating capabilities, saves money, and reduces waste. It is also collaborative and can be jointly worked on by teams of people.

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