Essay Sample on Maximizing Profits Through Effective Financial Management

Introduction

Lastly, they generate income for an organization, which is the essence of all profit-making companies (Djordjevic, 2014). All the marketing strategy they employ is used to broaden its customer base, which then translates into more sales. The more revenue a company earns, the higher the profits. Shareholders who are the owners of the company want value for their investment and are happy when a company makes profits.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Finance Department

Finance is another significant pillar of an organization that plays a crucial role in the success of an organization. The success or failure of an organization depends on how finances are handled both inside and outside the company. Thus it is primary for the finance function to run smoothly and openly in an organization. The finance department is the institution mandated with running the day to day financial activities of a company. It also entails the use of economic principles to allocate money, which is a limited resource to the various department in an organization.

Role and Importance of the Finance Department

The finance department, as part of an organization, collects funds and plans on how the funds are used to ensure the organization functions efficiently. If there is any mismanagement of funds, it can lead to bankruptcy and closure of a company. The following are its main functions within and outside the organization.

The finance department is firstly involved in bookkeeping, which entails the recording and analysis of the daily financial transactions of a company. It also keeps track of all expenses and ensures any money given out is well accounted for.

Moreover, the finance department is tasked with maintaining the cash flow of an organization. An organization needs cash to run smoothly. The money caters for administrative expenses, paying off creditors and other miscellaneous costs that may arise. It is also in charge of collecting any debts due to the organization when they are due.

Besides, the finance department prepares the budget for an organization. A budget is a forecast on how an organization plans to collect revenue and projected expenditure. The department utilizes past data to come up with the budget. The budget gives the company the direction to be followed by the company to be profitable.

Lastly, the department analyses financial data and advises the management accordingly. They also facilitate the annual audit process by the external auditors. They ensure any tax liability by the company is paid on time to avoid penalties. The department also manages the assets of the company and ensure they are used efficiently to get better returns.

Human Resource Department

An efficiently run human resource department is primary to an organization. A robust human resource department provides a structure of managing its most valuable resources, which is employees. A human resource department is defined as the part of an organization that is entrusted with the recruitment of employees. The business environment is ever-changing, and an organization must have qualified employees to face these challenges.

Role and Importance of a Human Resource Department

For an organization to function efficiently and effectively, it must have the right employees for the job. Otherwise, if it has the wrong employees, it is a recipe for disaster, and it means the company will not achieve its objectives. The employees, on the other hand, must have their welfare taken care of by the department; otherwise, they will not be motivated to work.

The most vital task for the human resource department is to screen, recruit, and place the right candidate for each job (Goswami, 2018). They ensure the recruitment process is transparent and abides by stipulated regulations. This is a crucial task which helps in developing an efficient workforce and thus avoid employing incompetent workers (Goswami, 2018).

The Human resource department also must train and develop the workforce so that they can know what new trends are on the market and adjust accordingly. This is pivotal in enhancing the skills of workers, which makes them better employees in terms of performing their duties.

The human resource department is also tasked with managing the employee's relationship with one another and the organization. When there is a good rapport in organization activities will run smoothly. For an organization to work cohesively, then the management and employees should be on the same page. They also come up with ways of motivating the workforce and cater for the welfare of the employees.

Teamwork and Its Importance

An organization is made up of different departments that must work together for the success of any company. The success of an organization is not because of managers alone but also the individual cooking tea for employees to the security guard on the gate. They play a small role, which in turn, with other efforts from other departments contributes to the success of a company.

Collaborative Work Practices

Human Resource and Finance

The finance department and human resource department work together on numerous occasions for the benefit of the company. A good example is when a company wants to pay the benefits of an employee. The human resource department will calculate the amount payable and forward the relevant document to the finance department, which will then verify and make payment to the employee.

Marketing and Finance

Firstly, the finance department ensures that the marketing department has adequate financial resources to carry out marketing and advertisement. When the marketing department strategies work, it means there will be more revenue for the accounting department to manage. The marketing department is also involved in the budget-making process. This is because the finance department has to factor in all future marketing prospects in a budget and the marketing department is best suited to give out that information. Thus the two department's s need to work together for the benefit of the company.

Financial Management and its Importance

Financial management entails a plan of action on how to organize and control all the economic activities within an organization. It plays a primary role in ensuring the shareholder's wealth is maximized while the organization still has enough funds to function efficiently (Mohr, 2008). The key elements for financial management are financial planning, ascertaining the required capital, framing of economic policies to be followed, and setting out controls to ensure finances are well utilized.

Balance Sheet

A balance sheet is an essential financial document that shows the financial status of a company at a specific given time. It further displays the assets and liabilities the company has. Moreover, it indicates the number of shareholders has invested in the company. The data in the balance sheet is essential for shareholders, investors, and management more so for more than one financial period as it shows if there is any trend. Investors will also look at the balance sheet to ascertain if there is enough cash in the institution to pay dividends. Creditors will also look at the balance sheet to see if the company is creditworthy or not.

Profit and Loss Account

A profit and loss account is a financial statement that details the revenue, cost, and expenses of a company for a particular, fiscal period. It is used to determine organization capabilities to generate income while keeping its price down to get more profit. It clearly states the top and bottom line of a company. The head is the revenue of the company, then all expenses and costs of doing business are subtracted to get the bottom line, which is either profit or loss earned.

Conclusion

The various departments in an organization cannot function individually if an organization is set to achieve its objectives. To run smoothly, each department should look at the bigger picture, which is the performance of the company. It is not a competition as to which department is doing better. Instead, it is the collective effort of all the departments. An organization can have an excellent marketing department, but if the finances of the company are not well managed, the company cannot perform well. If finance management is functioning well, but the human resource department is not treating employees well, the organization is doomed to fail. It is thus paramount for all the departments to work together in harmony towards the success of the company.

References

Djordjevic, B. (2014). The importance of global marketing. MEST Journal, 2(1), 116-124. Doi: 10.12709/mest.02.02.01.12

Goswami, A. (2018). Human Resource Management and Its Importance for Today's Organizations. Journal of Advances and Scholarly Researches in Allied Education, 15(3), 128-135. Doi: 10.29070/15/57308

Gupta, S. (2005). Human resource and Its Importance. SSRN Electronic Journal. Doi: 10.2139/ssrn.655601

Mohr, A. (2008). Financial management 101. Bellingham, WA: Self-Counsel Press.