Assignment
What is the primary financial control tool used to manage the operations of an organization and how can it equip managers with the information they need to make decisions? How are financial controls different for a global organization? Provide three examples. Guided Response: Respond to at least two of your classmates' posts. Evaluate their discussions by agreeing, disagreeing, or adding other ideas to strengthen or enhance the perspectives presented in their initial posts.
REPLY TO TANA:
There are three financial control techniques organizations can use to monitor their financial stability: budgeting, analyzing financial statements and financial audits. The technique companies use primarily to control the annual operations is through a budgeting system (Bierman, Ferrell, & Ferrell, 2016). An organizations operating budget will be written for short term goals which include the daily operations, cash flow and routine purchases; and their long term goals of purchasing capital equipment, plan for future expenses and possible environmental changes. I believe every large organization performs all three financial control techniques. Aside from budgeting, accounting must have the ability to analyze financial statements to understand the complete picture of the organization. Financial statements can indicate what the company owns or their assets, what they are making payments on and how much they have borrowed (Bierman, Ferrell, & Ferrell, 2016). The accounting department should routinely perform a financial audit of all the company's financial records. This allows the leaders to determine if they are achieving their goals, where they may need to cut back, where they may need to invest more money and their overall financial "success". Organizations that are global can have difficulty due to the change in currency in each country. The dollar is not represented the same in Mexico, Europe or Asia: one dollar does not equal 1 of that companies currency and the dollar as we know it fluctuates in its equivalent in other countries. Bierman, L., Ferrell, O. C., & Ferrell, L. (2016). Management: Principles and applications, custom edition [Electronic version]. Solon, OH: Academic Media Solutions
REPLY TO QUENTIN:
While there are numerous financial tools used by organizations, budgeting is the primary tool to manage the operations of an organization. "A budget is an annual, formal, written plan that directs future operations in financial terms. Budgeting allows companies to anticipate and control financial resource needs" (Bierman, Ferrell, and Ferrell, 2016, 15.1). It can equip managers in various ways. A financial plan is the go to reporting for finances and measures that have occurred over a given time. The budget can allow the managers to see the actual numbers to make well informed decisions for the company. The budget can be broken down into subsets to better understand and where issues may arise that are potentially harming the company. The budget is the surefire approach to finding out how the company is operating and managers can appropriate certain funds where needed if one area is lagging behind. Budgeting also helps with future forecasting and expansion. Financial controls may differ in the global market due to currency, taxes, and risk. Currency rates may be different in select countries and products may be sold for cheaper than the US, which may make it less beneficial for the company and include profit loss. Taxes may be higher and that would affect the budget and profit as well. Risk management is key because various ones may present themselves such as political uncertainty, new technology interruptions, and business interruptions. Bierman, L., Ferrell, O. C., & Ferrell, L. (2016). Management: Principles and applications, custom edition [Electronic version]. Solon, OH: Academic Media Solutions.