Financial Management

Written by Patricia Tunstall
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Good financial management is the result of the business manager and accountant working in tandem. The accountant takes the lead in setting up an accounting system that conforms to generally accepted accounting principles (GAAP). The business manager's input ensures that this system complements the company's overall business strategy.

Making sales is important. Increasing sales that contribute to a good margin per unit sold is one aim of intelligent financial management. Having competitive prices is important. Cutting prices may not be a good idea if, in the long run, it damages profits.

Profit and Costs

So-called profits can go sky high, but if the company's costs are out of control, profits are a mirage. Profits cannot be viewed in isolation. They are the result of good financial management, sound financial analysis, and knowledgeable financial advice.

Much of the information an accountant possesses is for management only. Confidential operating data and analysis are for internal consumption, unlike the external annual report mandated by the Securities and Exchange Commission. The management income statement, for instance, analyzes the unit sales volume, contribution margin, fixed and variable operating expenses, and per unit values. These are details that should not be revealed to competitors.


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