The scenario in this report is exhibiting research activities by management consultant in order to address issues which are faced by clients.
- Application of various approaches in order to make effective decisions.
- Analysis of principles of financial management so as to support business strategy associated with financial management.
- Evaluation of role of management account is business.
- Evaluation of financial decision making so as to gain sustainable performance.
Financial management is evolved now a days in the complex business organisation because the financial requirements of the companies are increasing day by day with the increase in the functioning of the business in different sectors. It is very important for the companies to meet the financial needs of the company as and when required so that the functioning of the company does not get hampered( Amenc, 2010 ). For these the financial managers are appointed to make important financial decisions such as efficient procurement of finance and utilising that finance in activities that are most profitable. So that the cost which is incurred in procuring finance is covered by investing in the projects which are most profitable.
For managing this the financial managers use various formal and informal methods for effective decision-making. Financial management principles that are required to be adopted by the organisation for achieving effective financial strategies for long term financial stability. Evaluating the role of management accountants and their value. And deciding the ways in which financial decision making is important for supporting long term financial stability.
P1. Types of formal and informal approaches used in effective decision making.
These days financial management has evolved as the most crucial function of the organisations. Finance is said to be the life blood of any organisation, and finance management is concerned with efficient procurement and effective utilisation of that find in the most productive activities. In the companies finance management functions are practised as corporate finance or business finance. The finance managers of the companies are concerned with the decision making activities of the organisations. Financing is the study of how much amount of money a company will require in its operations and how to distribute that fund according to the needs of the various departments. On the other hand , management is related with the effective planning, organising and direction of the activities of human resources( Bengtsson, and Wang, 2010.. ). The department heads are responsible for the efficient utilisation of funds in their respective departments. There are various approaches for the effective decision making in the organisation which are discussed as under:
Formal Approach: It is the approach which is used by the management to formally organise relationships with the members of the company and using the processes by which they can create an efficient and formal environment. Formal decision making helps in clarifying who is participating , when and how if it is documented properly. The formal approach helps in building equality and trust in long-term way , which means that the longer this approach is used the more it increases the trust among the employees. There are different types of formal decision making approaches used by the companies that are proved to be effective these are discussed below:
- Personal meeting: Also called as one on one meetings, are the meetings in which two persons meet personally face to face and exchange important informations regarding the issue and mutually come at a particular decision. It helps in saving the time as well as costs therefore leads into effective decision making.
- Department meetings: This is the most important formal approach which is to be used in every organisation in order to make effective decision making. The departments meeting are held by calling all the employees of the department and discussing the issues with them altogether , then finding a solution to the problem.
- Regular status reports on projects: This is a effective document that is used by the project heads for formal reporting on the status of the project to the head committee. This committee includes crucial members of the company such as senior manager or various stakeholders( Brounen, Derwall 2010 ).
Informal: In this approach of decision making the institutions are assured to wide extent by development by creating a system of informal regulations and process for ensuring effective decision making. It is considered as an reliable source for existing support network to make analysis of the performances internally as well as determining skills of employees working in an organisation.
- Popping on an colleagues desk at the workplace : This method is an essential aspect which is related with transferring information or communicating by popping at the employee's desk. This method distracts other employees from their work.
- Informal meeting: These are the meetings which are not as much planned and regulated or crucial in comparison with the formal meetings. The primary characteristic of this meeting is that it is unplanned. This meeting is arranged by the management at any time for the crucial decisions that are needed to be taken for the purpose of growth and sustainability.
There are few factors which affect an effective decision making:
Certainty: Decision are taken under the different critical situations of certainty in case the managers have enough data to measures the outcomes for company. The role of management is to find the available resources as well as conditions that are required at time of crucial decision making.
Risk: The most of the crucial decisions of the management are made under the situations of intense risks. But it is important to make such decision even after the involvement of risk , to remove the necessary impacts that affects the overall performance of the organisation.
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P2: Key financial principles used in the making the financial strategies
There is no such fixed financial plans or system that suits every organisation, but there are certain few basics that should be adopted by every organisation on order to attain good practise in financial management. This is very important to take into consideration certain key principles for formulating financial plans. These principles will work as a guiding technique to the management as well as the owners for effective decision making.
The some of the principles that are used in the companies are discussed below:
Consistency: This principle is known for the quality and situation where the activities of the business remains constant. It has always been observed that management policies of the companies always lacks consistency.
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