Managing Finance: Relationship, Objectives, Accounting, Frameworks, Challenges

Managing Finance

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Examine relationship between financial function and functional areas................................1
1.2 Impact of financial objectives on decision making...............................................................2
1.3 Differentiate between management accounting and financial accounting............................3
1.4 Analyse the impact of organisational and regulatory frameworks on organisation's
approach to financial management..............................................................................................4
1.5 Analyse the challenges organisations face accessing finance...............................................5
TASK 2............................................................................................................................................6
2.1 Differentiate between budget setting and financial forecasting............................................6
2.2 Evaluate budget setting approaches used by organisation....................................................7
2.3 Develop and justify a budget for an area of management responsibility..............................9
2.4 Analyse the factors that impact on budget management.....................................................11
2.5 Specify corrective actions to be take in response to budgetary variance............................11
2.6 Reporting procedures for authorising corrective actions to a budget.................................12
CONCLUSION .............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Finance is one of the resources required by almost every organisation to run the business
smoothly and effectively. It is procured from numerous sources with a view to allocate them
optimally so that decided goals and objectives can be achieved efficiently (Madura, 2020). It is
important for an entity to track the utilisation of the funds available for every department. In this
file, Rowlinson Knitwear is chosen which is located in United Kingdom. Furthermore, this
assignment covers relationship of financial function with other functional areas, impact of
financial objectives on decision making, difference between management and financial
accounting and influence of organisational, regulatory frameworks and challenges faced by
entities in procuring funds. In addition to this, difference between budget setting and financial
forecasting, evaluation of various approaches of budget, factors impacting budget management,
measures for budgetary variance and reporting procedures.
TASK 1
1.1 Examine relationship between financial function and functional areas
Financial function with production department- This department comprises of the
activities of manufacturing of products staring from raw material to finished goods. There are so
many processes involved for making a final item which can be sold to customers. The raw
material is purchased only when there is adequate finance available. The production manager of
Rowlinson Kniteweat has to make decisions such as make or buy, on the basis of which funds
are allocated.
Top management – finance relationship- The main goal of top management is to
survive for long term for which there should be adequate funds. Rowlinson Knitwear can raise
funds from the investors on the basis of good financial statements only. Therefore, financial
function helps in providing the considerations which are taken into account for making decisions.
Financial function and marketing- Marketing is all about raising the awareness of the
products by reaching the target customers. This has direct impact on the profitability of
organisation. Marketing team working in Rowlinson Knitwear has to get the required finance for
carrying the activities of advertising, maintaining stock and many more (Finkler, Smith and
Calabrese, 2018).
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Economics- finance interface- This relationship is related with complying with the
various economic policies as developed by the government of a country. There are several
standards and guidelines according to which the organisations have to maintain minimum level
of finance with it. It is a core finance function which takes into account the marginal benefits and
costs.
Accounting and financial functions- Many people use these terms interchangeably but
both of these have different functions. Financial function is related with preparing budgets and
procurement of funds on the basis of budgets developed. On the other hand, accounting is more
about controlling. Therefore, these two departments work closely where the accounting
department records every details of financial transactions in order to help the management make
financial decisions (Burtonshaw-Gunn, 2017).
1.2 Impact of financial objectives on decision making
Profit maximisation: Financial objectives helps the manager to make those polices and
procedure which help in enhancing profitability rate of the entity. Company increase their
profitability rate through increasing earning per share of their products.
 Return on investment: Financial objective of the organisation help to maximize the
return on investment. Manager of Rowlinson Knitwear after analysing market condition,
take decision to invest in those portfolio securities which helps to reduced their risk ratio
on investment and increase profitability return rate.
 Cost minimization: Main purpose of financial objectives are minimize the cost of
company,through reducing fixed cost of the company. Manger take those decision which
are beneficial for them to reduce variable and extra fixed cost charging on assets.
Rowlinson Knitwear reduce their cost through cutting expense of promote and
advertisement (Martin, 2016).
 Tax minimization: Financial objectives helps in planning those policies which helps to
reduce tax liability on company. Manager of Rowlinson Knitwear take decision to invest
in those assets on which government provides deduction on their tax liability.
 Corporate governance: It includes all the ethical rules and regulation which an
organisation needs to follow. Financial objective helps entities to work according in
ethical way,Each entity make those decision which are not harmful for environment. The
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