Effectiveness of the Financial Management Process - Assignment Example

Table of Contents Introduction 2 Effectiveness of the financial management process 2 Assumptions 3 Improvements needed 4 Implementation of changes 5 Conclusion 6 Recommendation 6 Introduction Stay Health Medical Practice Pty limited performs in the medical field and is looking towards reducing the effect of recession so that they can ensure proper performance for the company. The variance between the calculated and actual financial figures highlights the various areas Stay Health Medical Practice Pty limited needs to work upon so that they are able to reduce the effect of recession and grow. This will help Stay Health Medical Practice Pty limited to ensure that they grow their business according to the planned objective and ensure proper budgeting for the organization. Effectiveness of financial management process Stay Health Medical Practice Pty limited has ensured that their projected and estimated budget reflects effectiveness which is reflected in the growth of the organization. Some of the effectiveness which has been highlighted in the financial management process is as Firstly, Stay Health Medical Practice Pty limited has looked towards integrating both the financial and non financial information as it is seen that the company has accounted for all the expenses that the business will encounter. This has ensured that Stay Health Medical Practice Pty limited is able to meet its expenses by having a proper forecast for the future. Secondly, Stay Health Medical Practice Pty limited has ensured that the advertising expenses match the revenue earned by the company. For this Stay Health Medical Practice Pty limited has ensured the use of proper accounting principle and matching the cost with revenues. This highlights consistency and reliability in information. Thirdly, Stay Health Medical Practice Pty limited highlights the use of matching principle as the expenditure made on travel is matched by the revenues earned by the company thereby highlighting consistency. Fourthly, Stay Health Medical Practice Pty limited has apportioned the expenses incurred by them by distributing them along all the months. This has ensured that expenses are apportioned equally and the different shocks of the economy are being absorbed easily by the business. Thus, Stay Health Medical Practice Pty limited highlights various effectiveness in their financial process but has the following assumptions Assumptions The assumptions which has been taken in the budgeting process of Stay Health Medical Practice Pty limited is as follows Firstly, the indirect cost has been apportioned equally over all months. This will result in discrepancies as certain month’s results in more expenditure than other but on a long term basis it helps to provide consistency and ensures proper standards. Secondly, advertising and travelling have been directly apportioned as a percentage of revenues highlighting the fact that increased revenue increases the cost of advertising and travelling Thirdly, the budgeting process takes into account the economic conditions and based on it the budgeting incomes and expenses are forecasted for the future highlighting the understanding of external environment in the budgeting process. Improvements Needed Stay Health Medical Practice Pty limited has a sound financial management process and has a few assumption but working on the following areas and improving it will help to ensure better financial management process. Some of the improvements needed are as Firstly, Stay Health Medical Practice Pty limited need to develop a structure where continuous feedback is provided to the management so that areas which have to be worked upon to improve the financial health of the business can be ascertained. This will help in fixing responsibility and ensuring that Stay Health Medical Practice Pty limited is able to make timely changes so that the business works according to the planned situation. Secondly, Stay Health Medical Practice Pty limited needs to ensure that employees at all level understand the importance of budget and adhering to those will ensure rewards for the employees. This will help to reduce the deviations and if any deviations are there then contingency plan can be made to reduce it thereby ensuring proper budget for the business. Thirdly, Stay Health Medical Practice Pty limited should look towards developing a contingency plan. This will help the management and the organization to ensure that the business continues on track and within the stated budgets. Stay Health Medical Practice Pty limited by developing a contingency plan can ensure that the deviations get limited and the business is able check their developments. This should be done on a monthly basis so that the variances are limited and the business is able to perform effectively. This will help Stay Health Medical Practice Pty limited to ensure immediate steps and will help to improve the effectiveness of the financial management process. Lastly, the management should ensure flexibility while preparing budgets and having that will ensure that the deviations are few. Also looking to have flexibility will ensure that Stay Health Medical Practice Pty limited is able to change the budget according to the prevailing situation and ensure that the business doesn’t gets affected. Stay Health Medical Practice Pty limited will thereby need to develop a strategy which will help to make changes and improve their financial management process. Making the above improvements will help Stay Health Medical Practice Pty limited to ensure proper budgeting process and developing their business accordingly. Implementation of Changes Stay Health Medical Practice Pty limited need to ensure that the changes that have to be made is done in such a way that it multiplies the effectiveness of the financial planning process. Stay Health Medical Practice Pty limited needs to look to follow the following steps to ensure the required changes Stay Health Medical Practice Pty limited should ensure proper communication to the employees so that they understand the importance of budgets and making changes accordingly are understood by the employees. This will make the employees be ready for the changes that have to be dealt with and will prepare them for the future. This will also ensure that the employees are ready for the changes and will be ready to change and accept contingency plan for the development of the business. The management should also make the employees understand the different situation and the ways they will need to react so that the business flourishes. The management should also ensure that the salary and remuneration of the employees and partners are not sacrificed. The management should make the employees understand that their personal earnings won’t be hampered and they will benefit from the changes. Thus, Stay Health Medical Practice Pty limited needs to devise a strategy which is properly monitored so that the business is able to implement the changes and grow. Conclusion Stay Health Medical Practice Pty limited need to ensure that they have a contingency plan so that they are able to reduce deviations and the business is able to grow. Having a budget which reduces the deviations will help Stay Health Medical Practice Pty limited to ensure better efficiency and will help to multiply the effectiveness of the financial management process for the business. Recommendations Stay Health Medical Practice Pty limited needs to develop a contingency plan so that the deviations from the budgeted financial figures are reduced Stay Health Medical Practice Pty limited need to make the employees understand the benefit of changes and should educate them so that the employees readily accept the changes Stay Health Medical Practice Pty limited need to develop a feedback process so that the business is able to deal with the timely changes and having regular feedbacks will ensure that the deviations gets marginalized Read More