Dealing with organization finances can be quite challenging, especially if there are no channels and ways to control and monitor company finances. In most cases, this is happening when the organization is growing, and the income is increasing. Bradley Furniture Inc. has experimented with growth in recent years to implement new strategies and modern ways of doing business. For example, with reduced competence in the market and the company among market leaders, it has created a large customer base, increasing sales in the market. However, they are associated with problems associated with finances in the organization that lead to losses. Therefore, this poses a threat to the company as it risks making losses that may lead to liquidation.
Keywords: financial management, financial reporting, proper accounting
Working Title: Bradley Furniture, Inc.
Background of the project:
The role of the small and medium-sized enterprises in an economy is recognizable in an economy due to the benefits they offer to the society and the government. The businesses are set to grow through expansion of the production of the goods and services in case the market conditions are favorable. The firms usually have limited access to credit to fund their expansions, and they mostly rely on their revenues and sales of shares to facilitate growth and development. Kordecki and Bullen (2014) noted that a majority of small and medium-sized businesses do not successfully expand their operations due to poor accounting standards. Bradley Furniture Inc, a medium-sized organization, is in the stage of expanding the sale of its products across different markets. Over the past few months, the organization has recorded losses that are mostly attributed to poor financial management.
The maintenance of proper accounting and bookkeeping practices offers firms an opportunity to consolidate all the available sources of revenue to support growth and development (Ampofo & Sellani, 2005). The observation of principles of accounting, such as revenue recognition principle, cost principle, matching principle, consistency, and the going concern amongst others, would create a basis for the accounting practices (Needles et al., 2013). Additionally, the firm can source more capital by attracting foreign investments whenever it meets the recommended accounting practices set by the International Accounting Standards Board (IASB). Therefore, the continuous losses experienced by Bradley Furniture Inc originate from the organization's inability to fully adopted proper accounting practices for the management of funds and to attract other sources of revenues.
Bradley Furniture Inc. needs to enhance its financial management practices to address the challenges experienced in the expansion of the firm. The medium-sized enterprise has experienced growth in recent years due to the implementation of new strategies and modern ways of doing business. For example, with reduced competition in the market and the company being among the market leaders, it has created a broad customer base hence increasing its sales in the market (Bryce, 2017). However, this has been associated with problems associated with finances in the organization leading to losses. Therefore, this poses a threat to the company as it risks making losses that may lead to liquidation.
Key Research Question:
What strategies should Bradley Furniture Inc adopt to improve financial management practices?
Brief Literature Review:
SMEs represent the largest number of businesses across the U.S and even the rest of the countries. They are significant drivers of economic growth, particularly due to their capacities to employ millions of people. However, the firms face a critical challenge in the management of finances. Overall, SMEs in most of the regions face the problem of limited finances to facilitate their growth and development due to their incapacities to guarantee enough credit (Karadag, 2015). The United Nations Conference of Trade and Development (2013) noted that a majority of these enterprises do not have the recommended accounting practices and records. Consequently, they have a high likelihood of disappearing in the course of the business regardless of the potentials they hold because of poor financial management.
Jindrichovska (2013) highlights the critical areas of concern for medium-sized firms in financial management as a way of facilitating their growth and expansion. The organizations need to consider the concept of cash flow management and liquidity management, with the cash being highly considered as the greatest valuable nonhuman asset. The enterprises also need to focus on long-term asset acquisition as a foundation for the long-term success of the business. The medium-sized organizations need to evaluate the sources of funding, cost of funding, and capital structure. Jindrichovska (2013) states that a business cannot succeed without an appropriate financial policy of the long-term growth embedded in the management of the working capital. Therefore, poor financial management is the downfall of most of the SMEs.
Ampofo, A. A., & Sellani, R. J. (2005, June). Examining the differences between United States Generally Accepted Accounting Principles (US GAAP) and International Accounting Standards (IAS): implications for the harmonization of accounting standards. In Accounting Forum (Vol. 29, No. 2, pp. 219-231). Taylor & Francis.
Bryce, H. J. (2017). Financial and strategic management for nonprofit organizations. Walter de Gruyter GmbH & Co KG.
Jindrichovska, I. (2013). Financial management in SMEs. European Research Studies Journal, 16(4), 79-96. https://www.ersj.eu/repec/ers/papers/13_4_p7.pdf
Karadag, H. (2015). Financial management challenges in small and medium-sized enterprises: A strategic management approach. EMAJ: Emerging Markets Journal, 5(1), 26-40. doi: https://doi.org/10.5195/emaj.2015.67
Kordecki, G. S., & Bullen, M. L. (2014). Evolutionary developments in accounting standard-setting for private entities and SMEs. Journal of International Business and Cultural Studies, 8, 1. https://www.aabri.com/manuscripts/131665.pdf
Needles, B. E., Powers, M., & Crosson, S. V. (2013). Principles of accounting. Cengage Learning.
The United Nations Conference of Trade and Development (2013). Accounting and Financial Reporting by Small and Medium-sized Enterprises: Trends and Prospects. https://unctad.org/en/PublicationsLibrary/diaeed2013d5_en.pdf
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