Financial Performance Management

Written by Jacey Harmon
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Financial performance is vital for an organization to operate. When an institution's finances become mismanaged, it can have a horrible effect. Think back to the mid '80s when the savings and loans failed. Their failure was a direct result of mismanaging financial assets into the real estate market. Enron and Tyco are some more recent examples of what can happen when an organization's finances are not managed properly.

Maintaining an Organization's Finances

A way to manage an organization's finances is through financial performance management. Financial performance management is a tool that is used to gauge the financial operations of an organization. It is a method that can be applied to anything that pertains to finances. Everything from examining billing cycles to designing complicated financial models can be accomplished with financial performance management.

Executives can manage risk through proper financial management. Answers to questions about the validity of a proposed merger or acquisition can be found through financial performance management. Properly maintaining and managing cash flow is another application for financial management. Every organization generates some sort of cash flow. Cash flow that is well managed is fuel for an organization's growth.

Financial performance management is especially handy in developing financial forecasts. By combining employee and financial performance management programs, organizations will have a clear picture of what can be expected. Organizations can utilize the results of management practices to give earnings and revenue guidance to investors. Earnings and revenue guidance is valuable to publicly traded companies. Guidance can directly influence the market's value of a company.

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