Methods to Keep the Business Efficient - Essay Example

Executive Summary The hotel is dealing with a financial crisis due to the fact that the funds were misused which resulted in a shortage of funds. This requires that the hotel aims at developing the internal control system so that finances are managed in an efficient manner which can be achieved to a large extent by developing proper cash management strategies. This will require that the cash flows are properly monitored and steps are taken to improve the effectiveness in which the cash is spent. Using different budgets like cash budget, operational budget and capital budget will provide the direction that the hotel needs and will help to preserve the financials in a better way. This requires that the hotel incorporates the following Develop proper internal controls so that the financials are properly managed and the misuse of funds are controlled to a large extent Use different type of budgets so that the hotel has a better idea about the inflows and outflows and based on it look towards managing their cash resources which will bring them efficiency Table of Contents Introduction 3 Elements of Financial Management System 3 Budgeting Process 5 Cash Flow Forecasting 5 Cash Control Process 6 Budgets 7 Operational Budgeting 7 Cash Flow Budgeting 7 Capital Budgeting 8 Conclusion 8 Recommendations 8 References 10 Introduction Financials are the life blood for the organization and being able to manage them ensures that there is efficiency in different directions. This helps to manage the resources in a better manner and is seen by the manner in which the manner in which the financial sector is witnessing a financial crunch. This shows that the business doesn’t have proper cash control measures and internal controls which will facilitate the business and look towards differentiating the roles and responsibilities of the people within the organization. This report thereby presents the manner in which the cash is managed in the organization and looks towards developing cash control methods, cash handling process and managing their finances so that the operations can be carried out effectively. This report aims at the upper level management where they look towards highlighting the manner in which proper control method will help the business to gain efficiency. Along with this the manner in which different budgets will help to ensure that they are able to manage their finances in a better way. The scope of this report is to look into the manner in which budgetary control and internal control will help to deal with the cash requirements and bring changes in the manner the hotel is performing so that better efficiency can be gained in the future Elements of Financial Management System Lack on unclear goals and no separation of duties has affected the working of the hotel as the decisions taken by them are affecting the business. This requires that the differences between the role of different individuals is developed so that responsibilities can be better shared and the goals can be better achieved. This brings some of the elements of financial system to be as (Dropkin and LaTouche, 2008) Clear Goals: The management should clearly state the manner in which the financials are to be used so that the misuse of funds is controlled. This will also help to fix responsibility and ensure that he leakages which presently exist in the functioning of hotel is controlled and the financials are properly managed Budgeting: The hotel needs to lay stress on preparing different budgets so that the inflows and outflows of the business can be identified. This will require that the future earnings are estimated properly and by managing the resources the business will be able to ensure that the chances of liquidity crunch reduce. This will help to reduce the chances of a liquidity crunch and will ensure better financial policies Financial Control: The management needs to look towards ensuring that internal control is hired which aims at looking towards proper cash management strategies so that the financial resources are managed in an effective manner. This will help to control the financials better and will ensure a scope for long term financial preparation Auditing: The management also needs to ensure that the financials of the business is audited at regular interval of time. This should be done by matching the vouchers with the amount spent and stess should be taken to certify those as it will help to control the financials better and will help to reduce the mistakes in the financial system Budgeting Process The management has to realize the fact that proper budgeting of the expenses and managing the financials will help to improve the overall business process. This will ensure that the control methods improve and the business is able to act in a manner which will help to reduce the shortage of funds which the hotel is facing due to lack of budgeting process (Dropkin and LaTouche, 2008). The process will aim to ensure that different areas through which the internal controls of the business can be developed will help to ensure that the financial management aspect of the business improves and the business will be able to gain efficiency in the overall process of managing finances Cash Flow Forecasting This process will require that the hotel looks towards developing strategy which will help them to understand the inflow and outflow of funds so that the business is able to identify the cash holding and ensure that they don’t fall in a liquidity crunch. This process will ensure that the hotel doesn’t have to deal with the problem of a financial crunch as the hotel through this methodology will be able to develop strategies so that they have sufficient cash at their disposal (Dropkin and LaTouche, 2008). To ensure effectiveness the hotel has to look towards ensuring that the cash flow forecasting involves the following Ensure that the business has sufficient cash to carry out their daily operations so that the chances of a liquidity crunch reduces Look towards ascertaining the cash flows so that in case of improper cash flows certain payments can be delayed The hotel based on their inflows and outflows will also get the required time to prepare for the required finances and at the same time delay payment of some bills if the business doesn’t has sufficient cash Cash Control Process The hotel needs to look towards ensuring that the cash is used in the correct direction as the hotel has witnessed that the funds were used in direction which were incorrect and resulted in the misuse of funds. Proper cash control process will help to facilitate the business of hotel if the financials are controlled in the following way (Dropkin and LaTouche, 2008) Provide correct data: The management needs to ensure that correct information related to the hotel income and expenses are provided so that there is better control and monitoring over the finances Preserving valuable information: The management has to ensure that the authenticity of the expenses is provided which can be achieved by ensuring that all the voucher pertaining to income and expenses are preserved. This will provide a strategy through which the cash is controlled and efficiency in the business is gained Ensure Compliances: The hotel has to ensure that they comply with the legal requirements both in terms of income and expenses. This would mean that the financials are audited which will ensure that there is better control and the financials of the business are used in the most effective manner Budgets The hotel management needs to understand the importance of budgeting as it will help them to control the financials in a better manner and will provide the required leverage which ensures better use of finances. The management also needs to realize the fact that it is an ongoing process and changes with the changing business environment. This will thereby ensure that the hotel is better prepared to deal with the changes that the business is encountering and this will get reflected in the budgets which will thereby ensure better policies to manage the financial resources (Sharon and Cheryl, 2007)\ Operational Budgeting This is one of the prime budgets that the hotel has to look as this budget will help to understand the inflows and outflows of the business pertaining to revenues and expenses. This will thereby help to understand the manner in which the business is able to meet its expenses out of its daily operations and which will thereby help to deal with the financial requirements in a better manner. This will also provide the framework through which better coordination among the different departments is developed so that better financial policies are in place to deal with the financial requirements of the business (Sharon and Cheryl, 2007) Cash Flow Budgeting This budget will throw light on the manner the hotel receives the inflows and outflows of funds. This will help the hotel to manage the resources in a manner through which the business is able to manage the cash flow pattern. As this will help the management to understand the manner in which the business will be able to get the finances it will provide an opportunity where the hotel is able to ensure that the cash requirements for the business is identified before hand. This will help to deal with the financial crunch in a better way and ensure that efficiency is gained in the management of financial resources (Sharon and Cheryl, 2007) Capital Budgeting This will help the hotel in determining the amount the business is looking to spend on long term assets. This will guide the management to ensure that they are able to develop strategies so that the cash required for capital assets is not financed through the daily operations of the business. This will thereby help to reduce the pressure on the operational activities and will help the hotel to manage their finances effectively so that overall gain for the business can be ascertained in a better manner (Sharon and Cheryl, 2007) Conclusion The hotel which is reeling under a financial crunch needs to look towards understanding the importance of having proper internal control measures and proper cash handling process so that the chances of a financial crunch reduces. This will require development of different budgets and bringing a change in the overall efficiency so that productivity improves and the hotel is able to manage the finances effectively and ensure that the business is able to grow Recommendations The hotel has to ensure better internal control process is used in the organization which will help to improve the finances of the hotel. This will require that the hotel develops proper cash control methods and uses different forms of budgets so that overall efficiency can be gained and misappropriation of funds can be reduced. This will require that the hotel also looks towards separating the role and responsibilities of the employees within the organization so that financial leverage can be ensured. Along with it the hotel has to look towards using different budgets like cash budget, operational budget and capital budget so that the finances are managed in a better manner. This will help to manage the cash position and will thereby ensure that efficiency is gained in the overall process. This will help the hotel to ensure that the financial agreement is measured in a better way and will help the hotel to ensure that better financial arrangements can be made for the future. References Dropkin, M and LaTouche, B. 2008. The Budget-Building Book for Non-profi ts: A Step-by-Step Guide for Managers and Boards, San Francisco, Calif.: Jossey-Bass Publishing Sharon, G. and Cheryl, D. 2007. Thinking Broadly: Financing Strategies for Youth Programs, Washington, D.C.: The Finance Project. Retrieved on September 4, 2012 from http://fi nanceproject.org/publications/Thinkingbroadly_PM.pdf Read More