Sound Financial Management

Picture of Business in Unsound Financial Management 
I compare sound financial management with a strong building which always stable in big storm. If you have adopted sound financial management techniques, your business will survive in every fluctuation in the industry and economy. For example, Interest rate volatility, reduced availability of credit, fluctuating rates of inflation, high employee costs, the commercial forces of price pressure, extended credit terms and increasing competition can break your business if there is not any sound financial management in your business. So, if you are the student of finance, you should understand the meaning of sound financial management and its techniques.

Meaning of Sound Financial Management

Sound financial management is that part of management in which we learn to get and use of fund under effective control. Every risk of business is evaluated in the financial management. In this, we solve our capital collection problems, insufficient credit terms, insufficient sales, inventory issues and reasons of high operating expenses. We buy the fixed assets which are necessary for our business. No buying of unrequired fixed asset will reduce the risk of decrease in profit because excess fixed asset without use will not generate any income but increase our cost with depreciation.

Techniques of Sound Financial Management

1. Follow the Accounting Standards

You would listen that some businesses  failed due to poor financial management. They did not follow the accounting standards. Best accounting practice is good technique of sound financial management. If your records are upto date with following all accounting standards, it will give your true and fair view of your financial status. With this, you can make good financial planning. You can control by checking the weakness through reading your correct financial statements. If you have done  Bad practices. You have inadequate records. You have  unqualified accountant who do not know to follow the accounting standards, you can see the bad face of your business.

As per Patron Prince Michael of Kent

Sound financial management is the crucial factor, not only in the survival of new businesses but for making business more efficient, and sound financial management starts with effective bookkeeping. The Institute of Certified Bookkeepers, ever since its inception, has contributed significantly to good business practice, particularly amongst small and medium sized enterprises, and I am delighted to support this in my role as Patron.

2.  Working Capital Management Techniques

Working capital management techniques are the part of sound financial management techniques. In working capital management techniques, we use cash management techniques, inventory management techniques, debtor management techniques and creditor management techniques. For example in cash management, we make cash flow statement, do cash flow analysis, cash budget. All these things helps us, what is the need of cash, what amount of cash should always be in our pocket. Which expenses will we have to pay soon. Which incomes will we have to receive in cash soon. In inventory management techniques, we can calculate the correct quantity of inventory which we need in business for producing new products. EOQ can be used for this. We also calculate minimum level, maximum level, reorder level and inventory conversion period. All are helpful for reducing the over and low buying of inventory. We also calculate  average collection period and average payment period. With this, we can estimate correct working capital.

3. Capital Budgeting Techniques

You know that we pay big money on buying of fixed assets or in investment. So, it is better to know which fixed asset will give high return. Without knowing this, we are just gambling with business money. Thanks capital budgeting techniques who supported to make sound financial plan. In capital budgeting techniques you can use buy back period, NPV, IRR and Profitability index.

4. Budgetary Control Techniques

By making different budget, we control our business's fund. In budgetary control techniques, we use variance analysis, responsibility accounting, adjustment of fund, ZBB. Detail of all these techniques, you can read at here.

Related : Financial Management 







access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation Diwali Messages documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps Google Adsense google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting Intangible interest international Internet Introduction of Tally 9 inventory investment investment in Shares invoice IT Japan Job costing journal entries Journal Entries eBook Help Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting Online Accounting Course otcei pakistan parents pay pal pdf Personal Finance pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance truthfulness tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
Accounting Education: Sound Financial Management
Sound Financial Management
Accounting Education
Not found any lecture VIEW ALL Continue reading Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock