Managing finance: Introduction

Liaise with your bookkeeper regularly to reconcile actual cash-flow with operational budgets. Finance soon gets trickier than it looks, as you will soon see when you talk to your accountant. For example:

• Even very simple systems nowadays are normally computerized.
• Accounts receivable are assets that don't show in your current cash balance.
• Accounts payable are liabilities that don't show in your current cash balance.
• You might write off an account receivable as a bad debt.
• You might have funds on hand, but they might be already committed to a large expenditure in the near future.

You will notice patterns emerging in how money comes in and how it goes out. For example, you will notice deviations from any financial plans:

1. cost blow-outs,
2. unanticipated sources of income or expenditure,
3. changes in cash-flow cycle,
4. changes in asset status,
5. unspent funds,
6. etc.

The rule of thumb is that the sooner you recognize the patterns in the finances and become proactive in controlling them, the better off your organization will be. In other words, you need to identify cost variations (whether actual or potential), evaluate options and recommend or instigate action. It might be your job to fix the problem, but you should heck whtehr you need to tell your supervisor, or ask his/her permission. In other cases, it will be your supervisor's job to fix the problem.

Later sections examine factors that will help you understand what is going on and do something about it if necessary. Some of these factors are:

1. Financial cycle
2. About business units
3. Resources
4. Waste
5. Fixed vs. variable costs
6. Direct and indirect funding
7. How to determine costs and prices
8. Cash flow
9. Examples of financial risk factors