Manage organisational finances Q And A

Interpreting Quarterly Balance Sheets to Optimize Business Finances

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What does a balance sheet enable you to do?

A balance sheet provides an individual to get a quick overview of their business finance. This is typically analyzed at the quarter of a year or at the end of the year. It also helps to get detailed information about the number of outstanding payments that the company has. A balance sheet is used for generating a financial statement that helps to report the assets, liabilities, and shareholders equity of a particular company (Fagereng, Holm & Natvik, 2021). Assets refer to the company’s value, Liabilities refer to anything that the organization owns, and shareholders’ equity refers to the belongings of different shareholders of the company. The financial statement got from the balance sheet helps an individual or group to access the financial health of the company.

Poor cash flow may arise from what?

When a company face problem paying its liabilities, then there occur problems related to poor cash flow. Other than this there are several other problems that cause poor cash flow in the company. The main causes include low profits earned by the organization which generates a very low amount of cash for the company (Afiezan, Wijaya & Claudia, 2020). Sometimes it is also seen that various companies allow extra discounts and credits to facilitate their prime consumers this also affects poor cash flow in the company as it fails to meet the required financial goal set by the organization. Overtrading is another root cause of poor cash flow in the company.

Monitoring expenditure has important advantages. What are they?

Expenditure tracking has several advantages related to finance in an organization. Firstly, it helps the organization to stick to its budget and not overspend. Keeping track of the expenses helps the company to understand daily expenses and also helps them to restrict spending on unnecessary items (Dias & Paulo Silva Cunha, 2018). Monitoring expenses helps to identify expenditures throughout the month by making individuals aware of their spending habits. Tracking monthly expenses helps to understand the unnecessary payments made in the month and rectify them to reduce the expenditure. This also helps to meet the financial objectives that are set by a company or an individual. Creating a savings plan can help to meet various short-term goals for an individual.

Why do you need a good financial record-keeping system?

It is very essential for every business to keep a good financial record as it has several benefits related to it. It helps business organizations to keep track of their progress in their business. Keeping track of the progress can help companies to improve various aspects of their business which eventually can help them to develop their organization in a much better way (Aladejebi & Oladimeji, 2019). Keeping good financial records can help to understand the source of income for an individual as it can help to identify various flaws related to it. This helps to create proper statements related to tax returns. This record includes the source of income, expenses, and credits that an individual makes. Therefore, it is important to keep good financial records in order to be safe.

Give a description of the 3 most common programs used for financial input.

Various financial management software is used for financial input. The three most popular software used is QuickBooks, Kissflow Finance, and Xero.

• QuickBooks: It is a tool related to financial management which focuses on contributing towards small and medium size businesses (Mosteanu & Faccia, 2020). It helps an individual to keep track of various banking statements, and different payment invoices, track various expenses and identify the payroll of an organization.
• Kissflow Finance: This tool is designed to help individuals or groups to generate a system of approval that allows workflow for the financial process (Kissflow.com, 2022). Its visual interface is very unique as it helps individuals to make changes to their application based on their preferences.
• Xero: It is an accounting tool that helps to make professional recruiting statements, create bank statements, and also help to get credit card statements.

Give a detailed description of the below types of expenditure and income:

• a. Gross profit: The gross profit is the profit of an organization that is calculated by subtracting the total cost of the goods sold from the total sales of the organization (Kenchington, Wan & Yüksel, 2019). Total sales refer to all the goods sold by the company and the total cost of goods refers to the summation of all the variable costs that are involved in the sales.
• b. Net profit: Net profit can be stated as the total sum of money earned by the business organization by eliminating all the expenses due to the operation of a product, interest given, and the tax given over a specific period of time. It is important to have knowledge about gross profit before analyzing Net profit. 
• c. Stock turnover: Stock turnover which is also known as inventory turnover is defined as the financial ratio that shows the number of times an organization has turned over its inventory that is related to its cost of goods sold for a fixed period of time.

Describe what the following 3 phrases mean in detail:

Converting financial data to ratios or percentages: The ratio in a financial data of a company is used to build a comparison with time or related to other data that are available in the report. These ratios help to have a quick glance at the various aspects of the financial statements like Liquidity measurement ratios, profitability ratios, debt ratios, performance ratios, cash flow ratios, and Investment valuation ratios.

A ration by itself means little unless it is benchmarked: This phrase describes what is a ratio and how these ratios can be used to analyze the financial performance of the organization (Tregle, Nix & Alpert, 2019). Benchmarking is related to choosing various performance measures that can be used to compare an individual against various other organizations.

The benefits of financial analysis: It is related to various advantages a business organization gets from analyzing its financial status from time to time. It is very essential because financial analysis helps to follow the various business laws and regulations set by the company. It also helps to meet the various needs of the stakeholders and other parties involved as it can bring a lot of profits for the company. 

What does “Tax Liability” mean?

Tax liability refers to the amount of money an individual owes to the tax authorities. The tax authorities include the local authorities, state authorities, and federal governments. The government uses these taxes paid by the individuals to invest in different social programs and also in various administrative roles (Kraj?ák, 2020). These include providing retirement pensions to different individuals and also giving several benefits to physically challenged persons. Tax liabilities can also be current liabilities which refer to short-term debts that an individual needs to pay in a year. Short-term liabilities also include the current debts in the balance sheet of small business organizations.

Effectively auditing a budget requires an estimation process that is acceptable and/or reasonable. What are some issues to consider?

The issues to consider while auditing a budget involves the consideration of issues related to the previous budget, profit, and loss statements, checking of balance sheets, running costs, or operating expenses of the business organization, and analyzing the payroll figures and inflation rates within the organization. Previous profit loss statements can have a lot of figures that may not be relevant in the current scenario, and such figures can affect the overall budgeting process in a significant way (Meidawati & Assidiqi, 2019). The previous budget may have some unrealistic budget estimates that can hamper the overall auditing of the current budget as the same issue will be repeated consecutively. These are the main issues to consider while other issues mentioned above also can have a significant impact on the auditing process.

Explain the terms used to describe variations and what can the unfavorable variances be further classified into

An unfavorable variance is said to be an accounting term that helps to define situations where the actual cost is greater than the standard or projected costs. This type of variance can help to keep the management on alert about the organization’s profit as it can be estimated to be comparatively less compared to the expected return. It also describes the instances where the actual costs are higher compared to the projected costs. Unfavorable variance can also be caused due to the outcome of lower revenue earned, higher expenses, or can be a combination of both. Organizations understand the revenue that can be generated to bring sales and deliver those products to costumes of the business organization.

What are the 3 pieces of financial documentation necessary to verify expenditure? Give an explanation for each

Three financial documentation that is necessary to verify the expenditure involves the following:

• The income statement: The income statement can be useful to understand the places where there have been places of expenditure made. It can help to eliminate unnecessary expenditures and boost the productivity of the business organization. The profitability is generally measured by subtracting expenses from the revenue earned.
• The balance sheet: The balance sheet help to identify the liability of an individual or of an organization. This helps to identify the expenditures that are needed to be done in the future.
• The statement of cash flow: The cash flow helps to identify the financial activity of the company over a fixed period of time. This helps to understand the source of income for the company therefore can efficiently manage the expenditure.

To ensure that you are in a good position to negotiate your budget submission what should you do?

I would take a few steps in order to put myself into a position where I have all the rights to negotiate the budget.

• To be able to compromise: It is not possible to get all the requests to get granted. It will be important to identify and understand the various aspects of the budget that are required to be negotiated. In that way, I will feel well-prepared and will be able to negotiate effectively without panicking.
• Targets sent to subordinates: I would try to send the targets that are required to be achieved to my lower subordinates so that there are no problems related to negotiation in the future. Also set performance data as a benchmark to achieve the targets. 

References

Journals

• Afiezan, A., Wijaya, G., & Claudia, C. (2020). The Effect of Free Cash Flow, Company Size, Profitability and Liquidity on Debt Policy for Manufacturing Companies Listed on IDX in 2016-2019 Periods. Budapest International Research and Critics Institute-Journal (BIRCI-Journal) Vol, 3(4), 4005-4018. Retrieved from: https://scholar.archive.org/work/hjkcirt2qzgf7ltv3qizt74a44/access/wayback/http://www.bircu-journal.com/index.php/birci/article/download/1502/pdf
• Aladejebi, O., & Oladimeji, J. A. (2019). The impact of record keeping on the performance of selected small and medium enterprises in Lagos metropolis. Journal of Small Business and Entrepreneurship Development, 7(1), 28-40. Retrieved from: https://www.researchgate.net/profile/Olufemi-Aladejebi/publication/333421529_The_Impact_of_Record_Keeping_On_the_Performance_of_Selected_Small_and_Medium_Enterprises_in_Lagos_Metropolis/links/5ced1690299bf109da752bcd/The-Impact-of-Record-Keeping-On-the-Performance-of-Selected-Small-and-Medium-Enterprises-in-Lagos-Metropolis.pdf
• Dias, D., & Paulo Silva Cunha, J. (2018). Wearable health devices—vital sign monitoring, systems and technologies. Sensors, 18(8), 2414. Retrieved from: https://www.mdpi.com/1424-8220/18/8/2414/pdf
• Fagereng, A., Holm, M. B., & Natvik, G. J. (2021). MPC heterogeneity and household balance sheets. American Economic Journal: Macroeconomics, 13(4), 1-54. Retrieved from: https://www.duo.uio.no/bitstream/handle/10852/88853/2/mac.20190211.pdf
• Kenchington, D., Wan, C., & Yüksel, H. Z. (2019). Gross profitability and mutual fund performance. Journal of Banking & Finance, 104, 31-49. Retrieved from: https://www.ivey.uwo.ca/media/3787832/gross-profitability-and-mutual-fund-performance.pdf
• Kraj?ák, M. (2020). Analytic hierarchy process in czech taxpayers’ decision-making regarding their tax liability. Journal of Tax Reform, 6(2), 142-156. Retrieved from: https://journals.urfu.ru/index.php/jtr/article/view/4623/3585
• Meidawati, N., & Assidiqi, A. (2019). The influences of audit fees, competence, independence, auditor ethics, and time budget pressure on audit quality. Jurnal Akuntansi Dan Auditing Indonesia, 117-128. Retrieved from: https://journal.uii.ac.id/JAAI/article/download/14081/9839
• Mosteanu, N. R., & Faccia, A. (2020). Digital systems and new challenges of financial management–FinTech, XBRL, blockchain and cryptocurrencies. Quality-Access to Success Journal, 21(174), 159-166. Retrieved from: https://core.ac.uk/download/pdf/326518997.pdf
• Tregle, B., Nix, J., & Alpert, G. P. (2019). Disparity does not mean bias: Making sense of observed racial disparities in fatal officer-involved shootings with multiple benchmarks. Journal of crime and justice, 42(1), 18-31. Retrieved from: