Financial Resources

Basically, Financial Resources is known as the funds or the availability of money in the form of cash, securities, creditors, loan facilities, etc possessed by individuals, governments, businesses, a wide variety of organizations including schools and non-profit organizations used to acquire the natural and human resources needed to provide products; it is also called capital.

Finance is one of the most important aspects of business management and without a proper financial resource planning any business is unlikely to maximize the wealth or be successful. Managing money or a liquid asset is essential to ensure a secure future, both for the individual and an organization.

The aim of this decision is to retain the resources in the business that are required to run the business or make additional investments in the business, as long as the returns earned exceed the required return. In theory, management should return or distribute all resources that cannot be invested in the business at levels in excess of the required return. This can be done by minimizing the amount of capital used for given business investments with given business returns.

According to Prof. Bradley, "Financial management is the area of business management, devoted to a judicious use of capital and a careful selection of sources of capital, in order to enable a spending unit to move in the direction of reaching its goals." [Cited Gitman, 1986; Pg. 8]

Therefore, it is vital important to organize a well-structured financial management to rationally use of capital resources by a proper allocation and utilization of the funds.

It also should carefully determining the debt equity ratio and designing a proper capital structure for the corporate. As for goal achievement, it should ensure the achievement of business objectives via wealth or profit maximization.

It is advisable that the regular finance functions should be performed including financial planning, assessing the funds requirement, identifying and sourcing funds, allocation of funds and income and controlling the use or utilization of funds towards achieving the primary goal of profit or wealth maximization.

It is must to have a leadership in the cost-effective use of an organization's financial resources by employing effective general, financial management practices and involving actively in organizational decision-making by providing timely and reliable financial and performance information and by analyzing the implications of this information in relation to the achievement of the organization's goals and objectives. It should ensure that the company's resources are protected from waste, fraud, and abuse by improving its accounting systems and internal controls.

 

Failure to implement a proper and efficient management of financial resources would jeopardize the company short and long term business planning strategies and objectives achievement. Indirectly would create discrepancy financial, wealth or profit maximization planning.

This situation would also be tarnishing the Company and management’s capabilities of running the short or long business strategies planning from the potential investors’ perspective that may unconfident in funding the company as they can be not reassured of receiving the returns in due course.

It would be a huge smashing for the company if it failed to utilize and manage the financial resources handsomely as this would create the uncertainty whether the company is capable of achieving the business strategies planning.

The unorganized financial resources may also produce an inconvenient financial statement which is the important document to support the Company’s plan of applying for any short or long term loans from any financial institutions. This scenario would jeopardize the opportunity of gaining the confidence of the bankers to release the funds as required.

Adapted from 'Competitive Advantage: Short & Long Term Financial Resources Achievement' by Capt Muhd Ismail Mohd Noor