Analysing the Financial Planning and Monitoring

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During the process of analysing the financial planning and monitoring, effectiveness is important to keep in mind that there are different methods that could be used which would result in a different approach and results for the organisation. Note that no all of them will help the organisation identify, plan and monitor the financial effectiveness or improve the wastes that they may face in the case or bad management.

In this way, is important to plan and choose the right methods to track and understand the organisation’s situation in relation to their finance. Doing this, we believe will helps them to be more effective and become more efficient as well.

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Considering the above, in the way to track, monitor and planning the business financial to evaluate their effectiveness we will complete the preparation of key financial statements and inventory records to analyse if the business is wasting anything and how to stop the waste from happening, keep an eye on the budget and records of all business expenditure for better analysis.

Within the budget analysis, we can identify through the periods some variances. When we evaluate those variances we can then identify problems such as poor management strategies including marketing and financial; wastes generated from errors, cost structure etc.

The above also occur when we monitor and review the Balance sheet and Profit and loss. During the review and monitoring process for those financial statements, we can consider some KIP’s to help us evaluate the business grow, efficiency and how profitable the business is such as COGS (the percentage of sales that covers the cost), Gross profit margin (efficiency indicator – the higher the gross profit is better the business sales are), Net profit margin (how much profit you make before tax), debt to income ratio (how many debit the business has?), liquidity ratio (does the business afford to pay their bills?), working capital ratio (how much capital should the business retain?); accounts payable turnover (how quick I pay my bills?), account receivables turnover (how quickly my client pay me?) etc. Each one of those has a different approach and we use each one of them to identifying whether the organisation lost or made money. In the case they lost, we can also identify the reason and take quick decisions to make it better.

The importance of this is analyses and monitoring processes are because we can identify how health the business’s finance is. Complementary through those indicators and identified variances we then can create or develop strategies to stop problems from happening or mitigate finances risk related to the organisation management plan. We can also update if necessary the business objective, operational perspective, invest in training, create new strategic planning and manage better the debt related with this poor management creating a method to be more effective and improve the business finance.

We will also maintain a constant strategy to review and monitor those indicators by doing those tasks:

  • Weekly review and monitor the budget outcome against the current financial plan within previous week report
  • Monthly review and monitor if the business objectives reflect the organisation’s financial plan
  • Day to day compare the actual expenditures against the budget
  • Day to day basis keep track on the financial resources and evaluate if it complies with the financial plan
  • Day to day monitoring cash flow
  • Monthly review, analyse and monitoring previous financial data to establish standards
  • Monthly review and monitoring of profit and loss and Balance Sheet within the previous month
  • Monthly review and monitoring the CVP in order to identify how profitable the organisation is.

We will link the costs, the volume of sales and the profit of each product to identify which one is more profitable and valuable to the organisation.

Works cited

  1. Bragg, S. (2018). Financial analysis: A controller's guide. John Wiley & Sons.
  2. Horngren, C. T., Sundem, G. L., Schatzberg, J. O., & Burgstahler, D. (2017). Introduction to management accounting (16th ed.). Pearson.
  3. Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2019). Accounting: Tools for business decision making (7th ed.). John Wiley & Sons.
  4. Lasher, W. R. (2019). Practical financial management (8th ed.). Cengage Learning.
  5. Malhotra, R., & Malhotra, D. K. (2015). Financial management: Theory and practice. Vikas Publishing House.
  6. Nofsinger, J. R. (2018). The psychology of investing (7th ed.). Routledge.
  7. Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2019). Fundamentals of corporate finance (12th ed.). McGraw-Hill Education.
  8. Spiceland, J. D., Sepe, J. F., & Nelson, M. W. (2018). Intermediate accounting (9th ed.). McGraw-Hill Education.
  9. Wild, J. J., Shaw, K. W., & Chiappetta, B. (2019). Financial accounting fundamentals (6th ed.). McGraw-Hill Education.
  10. Zutter, C. J., & Smart, S. B. (2018). Principles of managerial finance (15th ed.). Pearson.

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