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How Do I Choose the Best Financial Management Procedures?

Article Details
  • Written By: Osmand Vitez
  • Edited By: PJP Schroeder
  • Last Modified Date: 03 November 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Financial management procedures dictate how a company handles the capital that flows through its operations. Owners and executives often set these procedures as part of their overall general management responsibilities. Choosing the best financial management procedures is the result of finding a strong banking partner, creating internal controls, and evaluating current procedures for flaws. In many cases, there is not set of management procedures from which a company can select and implement. The process is organic and depends on the particular attributes of the company itself.

Most business organizations need a banking partner as part of their financial management procedures. The external institution provides some guidance on the procedures necessary to accomplish various tasks. Then, the company must come up with valid processes in order maintain the bank’s standards and make sure all tasks get handled in a timely manner. Large organizations often have single individuals at the bank responsible for their accounts. This helps create a semblance of order and design for financial management procedures.

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Internal controls are the safety measures a company implements to prevent fraud and other inappropriate employee action. These can be wide ranging, covering a variety of employees, job positions, and tasks. For example, money transfers may require the use of two signature authorizations for certain dollar amounts, usually over a high amount of money. Other times, internal controls prevent certain employees or job positions from accessing financial data or money. Accountants call this segregation of duties, where individuals have specific responsibilities that do not overlap, thus preventing the potential for fraud.

All companies have current procedures that may be subject to abuse or inefficiency. Owners and executives, therefore, must review current tasks and activities to ensure they are effective and prevent abuse. Using the bank agent can help a company select and review procedures that are most likely to cause problems. Directing and controlling activities never stop in an organization, regardless of its size and structure. Accountants are also available for use in the review process.

Some level of bureaucracy is always necessary in financial management and financial management procedures. Though organizations may desire an organic management structure, this system is often ill equipped for tight control of a company’s finances. Therefore, owners may implement multiple positions, such as a chief financial officer, controller, accounting manager, and others in order to control financial management. Owners rarely get too involved with the daily financial management activities.

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