3.1 Explain the importance of financial viability for an organisation
Good financial management is essential when starting your business and for the expansion of your business. Getting your finances in order means your business can work more efficiently and puts you in a better position when seeking funding for growth. Successfully managing your finances can create sustainability and growth for your business, so it's important to get it right.
Whether it's balancing the books, budgeting or good cash flow management, you can help improve the financial health of your business.
Financial viability of any organisation is, in my opinion, the most important factor in any successful organisation. It sets the financial benchmark for the organisation …show more content…
3.2 Explain the consequences of poor financial management
Unfortunately for many small companies, and many medium to large size companies, consequences of poor financial management can be catastrophic and ultimately lead to closure, bankruptcy and insolvency.
It all starts at the beginning making sure the company is viable and sustain this over the amount of time the company has set out its business plan for. However circumstances and market conditions can change very quickly and suddenly financial cracks can start appearing within the business and if they are not addressed immediately or as soon as, then the problems occur like a domino effect.
An example of this is where a business sells many a finished product or service to the market, however the business must procure many variable raw materials in order to complete the finished product and will have many ‘accounts’ with various suppliers. The business and different suppliers will have negotiated various payment terms varying from 30-60 days payment once an initial pro forma was set up and a relationship built. The business must make sure they are budgeting for these accounts on a daily basis. This even applies to amenities, telecommunications, internet
Good financial management is essential when starting your business and for the expansion of your business. Getting your finances in order means your business can work more efficiently and puts you in a better position when seeking funding for growth. Successfully managing your finances can create sustainability and growth for your business, so it's important to get it right.
Whether it's balancing the books, budgeting or good cash flow management, you can help improve the financial health of your business.
Financial viability of any organisation is, in my opinion, the most important factor in any successful organisation. It sets the financial benchmark for the organisation …show more content…
3.2 Explain the consequences of poor financial management
Unfortunately for many small companies, and many medium to large size companies, consequences of poor financial management can be catastrophic and ultimately lead to closure, bankruptcy and insolvency.
It all starts at the beginning making sure the company is viable and sustain this over the amount of time the company has set out its business plan for. However circumstances and market conditions can change very quickly and suddenly financial cracks can start appearing within the business and if they are not addressed immediately or as soon as, then the problems occur like a domino effect.
An example of this is where a business sells many a finished product or service to the market, however the business must procure many variable raw materials in order to complete the finished product and will have many ‘accounts’ with various suppliers. The business and different suppliers will have negotiated various payment terms varying from 30-60 days payment once an initial pro forma was set up and a relationship built. The business must make sure they are budgeting for these accounts on a daily basis. This even applies to amenities, telecommunications, internet