"what are the challenges of financial management":
Accounting is an indispensable corporate tool for any organization irrespective of size and business purpose – commercial or non-commercial. Financial management is a managerial process of acquiring funds, allocating and distributing these funds, and monitoring
financial resources to achieve organisational goals and objectives it is an activity of coordination of providing financial resources in the right quantities at the right time to the right place and on the right purpose. In any case, there are some obstacles which financial managers and companies experience in the process of efficient financing management.
Another major concern that arises out of using the three bases is cash flow management.
Most firms experience working capital deficiencies in which they do not hold sufficient cash balances to cover current needs like employees’ wages, suppliers, electricity tokens, and other cash outflows that crop up on the tour. It can be weekly fluctuations, or monthly fluctuations, or even fluctuations that cover an entire fiscal year depending on fluctuations in the business cycle.
Insufficient amounts of working capital means that the company’s financial position is in danger if it cannot pay the bills or the salaries on time. Financial managers are required to estimate, control and allocate cash in their organisations to avail funds periodically.
The other key problem area is that of capital budgeting and allocation.
Being large capital investments, organizational managers have to make wise investment decisions concerning new equipment, expansion projects, facilities and technology.
Such projects may take several years to implement with initial investment that may take a number of years to bear fruit. Managers in the financial department have to forecast the profit of cost required for a project to identify if it is profitable to proceed and provide capital to projects that provide high returns. Selecting competing projects when there is little money available is perhaps one of the most critical tasks.
Another emerging pressure is the regulatory compliance as well.
Legal reporting requirements and regulations of reporting formats are mandatory compliance regulations for businesses in a range of sectors including banking, healthcare, insurance and more.
Being up to date and meeting emerging regulations such as tax laws is a resource demanding exercise. Often, it is possible to outsource the work to accounting firms or recruit skilled financial human resource which may be very expensive.
Refusal to fulfill these regulations can cause steep penalties along with legal action.
The management of financial risks
is further complicated where constant changes in currencies, interest rates and prices of commodities prevail. Such items need complex treasury functions to handle risks associated with fluctuation. Managers also experience difficulties controlling finances with different currency, market, tax systems in the different locations and even language barriers in the functioning of Supply Chain of the global organization. Other risks, such as cyber risks, fraud and economic risks must also be looked at, since they also pose imminent threats.
However the biggest problems are the absence of proper data and reporting, transparency, decision making, and forecasting. Most organizations have disparate financial systems,let alone missing out on analytics or even data cleanliness.
Tightly packed systems, staff mistakes and technology can lead to decreased quality of reports. A lot of time, financial managers are active in an environment characterized by stale, incomplete or even erroneous information.
Consequently, financial management difficulties include the flow of cash, instrumental funding deployment, legal compliance, risks and precise data.
It is therefore evident that organizations with competent human resource in its financial departments, sound procedural policies and effective reporting solutions are well armed to handle these problems. Thus, financial managers should work very hard, and think at least one step ahead, in order to take charge of the business and ensure stable development during the constant, albeit unpredictable, economical fluctuations.
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