Why are performance & financial management important?
- November 7, 2019
- Posted by: Admin
- Category: Grow your Business
Performance & financial management is essential in achieving sustainable success, and is universal to all organizations, regardless of size, type, and location. Strategies and plans need to be informed by quantitative and qualitative insights and a sound understanding of the external competitive environment, including customers, as well as of internal organizational performance.
Executing strategy involves translating strategies into action, allocating resources to the right areas, and measuring results and holding people accountable. Performance & financial management covers all of these core aspects of managing and improving organizational performance. It involves understanding the linkages between intangible—or non-financial—factors and financial outcomes, as well as ensuring that operational activities are carried out effectively and efficiently. Managers need to know that the organization is doing the right things as well as doing them in the best way possible.
Executing strategy is often seen as more important than the formulation of the strategy itself. As Lou Gerstner reflected in Who Says Elephants Can’t Dance?, getting it done, getting it done right, and getting it done better than the next person can be far more important than dreaming up new visions of the future.
Effective strategic and operational decision-making hinges on information being relevant, timely, and reliable since it is used to answer key questions, including:
Are we adapting to meet changing market demands and anticipating future events and trends?
Are we delivering the results and sustainable value expected by our key stakeholders?
Are we optimizing productive capacity, resources, and capabilities for a range of anticipated economic conditions? and
Are resource allocation decisions aligned with strategic direction, goals, and objectives?
Sound financial planning, management, and control provides the basis for an organization achieving its goals and can be the difference between success and failure. Good financial management enables an organization to monitor its daily activities, maintain short-term working capital needs, and effectively manage its resources as well as provides the information it requires to enable it to plan and operate more efficiently.
While performance & financial management is critical regardless of size of organization, the formality, style, and scope of the approach will differ. SMEs may adopt less formal performance & financial management methods but it is essential they and their advisers understand performance & financial management methods and learn the different techniques to ensure success.
Professional accountants’ purview encompasses the application of tools and techniques to improve performance & financial management of organizations. They must have organizational and environmental awareness, and be cognizant and knowledgeable of other disciplines, such as technology, people and project management, and managing, measuring, and linking financial and non-financial activities and performance.
Technology and automation are also creating more and better information and analysis to support decision making and to help improve performance. Our advisors have moved into broader and more commercial roles where they can use their skill set to combine financial expertise and business understanding to help deliver sustainable organizational success for their clients.