Financial controls are critical for every organization, as they provide an opportunity to make sure that the resources it has are used efficiently. A company can use different methods that will guide it on its way to the maintenance of controls (Financial management, 2002).
First of all, a company has an opportunity to create a financially strategic plan that will be followed by all employees. It is critical to pay attention to finances from the perspective of future events, as the organization can operate decently only when the person knows what it should do to achieve the main goals. Employee compensation is one of the first elements that should be considered in this perspective, as the lack of decent policies and strategies leads to numerous issues within the organization.
The first step that should be made by the company is the identification of which department should receive a particular amount of resources. Right prioritization is sure to give a company a chance to receive the most benefit with the course of time. This plan should be applied to the organizational peculiarities (such as insurance, contributions, etc.). Then the goals (even the short-term ones) should be identified along with the predicted salaries and revenue. All this information should be easily accessed by employees so that they can see if things are going right. The assessment of the results will show if the organizational goals are achieved (Conneely, 2010).
This financially strategic plan can be advantageous when the environment changes are observed, as it enhances decision-making. When developing the plan, an organization may reallocate its resources so that they provide more financial advantages and enhance overall performance, which is critical for business success (Bentz, n.d.).
Business competition should also be thoroughly considered if the organization wishes to receive good revenue. The number of companies increases continuously, and similar products enter the market providing the clients with a wide range of goods. This environment makes companies lower prices, provide new products and services and advertise them in order to attract as many clients as possible (Competitive environment, n.d).
Of course, all these activities require additional costs. In this way, the company should set limitations regarding the amount of money it is able to spend on enhancing its competitive forces so that other areas of business do not suffer. Otherwise, there is an opportunity that the organization will face financial problems or will be neglected by its customers. Trying to implement financial controls effectively, the company should shape its competition (Kono & Barnes, 2010). The dominant procedures and bargaining power are likely to be considered.
Those businesses that are not new entrants have a range of financial benefits. To receive them, the company should focus on the scale economies, as it can save money on the logistical systems and advertising. The organization should consider what innovation and government policies it can implement to attract clients and receive profit. Rather often additional products and services can be provided to attract customers, as they do not require huge expenditures. Return on invested capital is the main thing that should be assessed by the company to make sure that it is doing well in the market. It mainly focuses on the benefits that can be gained due to the creation of strategy. In this way, the amount of money needed to remain competitive is considered. Here, the earnings are “utilized before interest and taxes are divided by average” (Porter, 2008, p. 83).
Bentz, R. (n.d.). Acquiring and managing financial resources. Web.
Competitive environment. (n.d.). Web.
Conneely, J. (2010). Strategic planning and financial management. New Directions for Student Services, 132, 51-61. Web.
Financial management. (2002). Web.
Kono, P., & Barnes, B. (2010). The role o finance in the strategic-planning and decision-making process. Graziadio Business Review, 13(1), 1-7. Web.
Porter, M. (2008). The five competitive forces that shape strategy. Harvard Business Review, January, 78-93. Web.