Generally, the paper "Formalised Strategic Financial Management in Small and Medium-Sized Enterprises in the UK" is a perfect example of a finance and accounting assignment. Financial management, that is the ways of raising, utilizing and monitoring funds, is crucial for any business, large or small. Effective financial management enables a company to maximize profits, increase shareholders’ wealth, expand the business and achieve long-term goals. In today’ s world, the role of the Chief Financial Officer is not simply of managing the company’ s finances but also to direct the funds towards the company’ s broader strategic goals.
Hence, financial management is not simply “ number crunching” but an important strategic role for the company (Johanson et al, 1996). The finance function moves beyond internally driven strategies to those that drive the competitive advantage of the company. For small and medium businesses, financial management is all the more important since such companies have to operate under limited funds and have to utilize finance judiciously in order to expand and achieve goals. Accounting practices may be considered as twofold: 1) financial accounting is a score-keeping and reporting tool addressed to external audiences; 2) management accounting helps managers to control costs and increase revenues. The UK Accounting Standards Board Statement of Best Practices on the Operational and Financial Review calls for “ discussion identifying the principal risks and uncertainties in the mainline of business, together with a commentary on the approach on managing these risks, and, in qualitative terms, the nature of the potential impact on the results” (quoted in UNCTAD, 2000).
In 2005, the government issued guidelines for reporting of Key Performance Indicators (KPI). The Operational and Financial Review (OFR) that was applicable till then was replaced with the new guidelines that were applicable to the 1290 quoted companies. In this paper, I will discuss the requirements for effective and formal strategic financial management in small and medium businesses in the United Kingdom.
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