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Finance Management in Organizations

In: Business and Management

Submitted By kimley
Words 1659
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Why is it important for an organization to have an eyeball view of its financial performance?
Companies need to constantly monitor their performance in terms of finances. Some companies use boards to assist in monitoring the financial activities of their organization. Monitoring corporate performance is a critical function of every board. An effective board monitors the overall performance of an organization, including its operational, strategic, and financial objectives. A key aspect of the board’s oversight role is to actively monitor management’s execution of approved plans, as well as the organization’s progress toward meeting its objectives. It is essential for the board to prioritize and enumerate the organization’s objectives in monitoring its performance. Boards should establish a consistent method for receiving, reviewing, and utilizing the data received. Boards use many data points to monitor company performance, including financial and non-financial metrics, and industry and peer information, which can come from board reports, trend analyses, surveys, financial statements, industry benchmarks, and audit opinions. Knowing which metrics are most effective in understanding performance and indicating potential issues can be challenging, yet beneficial to the organization. Organization’s financial plan typically links to the annual operating plan that has been established. The annual operating plan provides details on the organization’s objectives and how they will be achieved, while the financial plan identifies the revenue and expenses for the activities associated with each objective. The board should use the financial plan to monitor the organization’s performance throughout the year. The primary responsibility for monitoring the financial plan typically falls to the audit committee. The board should periodically review or receive a summary from the…...

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