Having
clear financial goals and metrics allow firms to implement strategy and track
success.
Keith Turner QuickSilver Funding Solutions daily make important
financial decisions such as scheduling operations, hiring and firing personnel,
preparing a budget, approving a capital investment, or sending an invoice for
payment. However, very often those managers do not have the necessary skills to
understand the financial implications of their decisions. This can lead to
negative consequences: resources are wasted, poor decisions get made, and the
financial performance of the organization suffers.
For
instance: not having an effective cost management can greatly affect profits
and business processes. To prevent such serious issues, advanced training in
this field can help to manage costs for increased return on investment. Eventually,
employees will be able to make the best financial decisions. This will surely
help businesses in strategic planning as well as decision making. Here are some
of the financial metrics which can significantly help in this process:
Cash Flow
The
cash flow helps to measure of the firm’s financial position and shows how
efficiently its financial resources are being utilized to generate additional
cash for future investments.
KeithTurner QuickSilver Funding Solutions gives a clear indication of the net cash available after deducting the
investments and working capital increases from the firm’s operating cash flow.
This metric can be used when they anticipate substantial capital expenditures
in the near future or follow-through for implemented projects.
Economic Value
Management
has the responsibility to make efficient and timely decisions to expand
businesses that increase the firm’s economic value and to implement remedial
actions in those that are destroying its value. This can be determined by
deducting the operating capital cost from the net income. Organizations usually
set economic value-added goals to measure their businesses’ value contributions
and enhance the resource allocation process.
Asset Management
This
involves the proper management of current assets and current liabilities,
turnovers and the enhanced management of its working capital and cash
conversion cycle. This practice can be used by companies mostly when their
operating performance falls behind industry benchmarks or benchmarked companies.
Profitability Ratios
Profitability
ratios are a measure of the operational efficiency of a firm and also indicate
inefficient areas that require corrective actions by management. Basically,
they measure profit relationships with sales, total assets and net worth. Keith Turner QuickSilver Funding Solutions
says It is a good thing for companies to set profitability ratio goals when
they need to operate more effectively and pursue improvements in their
value-chain activities.
Growth
Growth
indices help in evaluating sales and market share growth and determine the
acceptable trade-off of growth with respect to reductions in cash flows, profit
margins and returns on investment. Usually, growth drains cash and reserve
borrowing funds, and sometimes, aggressive asset management is required to
ensure sufficient cash and limited borrowing. Hence, companies must set growth
index goals when growth rates have lagged behind the industry norms or when
they have high operating leverage.
Risk Assessment and
Management
One
of the major concerns of companies is to address key uncertainties by
identifying, measuring, and controlling its existing risks in corporate
governance and regulatory compliance, the likelihood of their occurrence, and
their economic impact. From there, a process must be implemented to mitigate
the causes and effects of those risks. These assessments should be made when
companies anticipate greater uncertainty in their business or when there is a
need to enhance their risk culture.
Optimizing Tax
It
is important for business units to manage the level of tax liability undertaken
in conducting business and to understand that mitigating risk also reduces
expected taxes. Besides, new initiatives, acquisitions, and product development
projects must be weighed against their tax implications and net after-tax
contribution to the firm’s value. Generally, performance must, whenever
possible, be measured on an after-tax basis. It is wise for global companies to
adopt this measure especially when operating in different tax environments,
where they are able to take advantage of inconsistencies in tax regulations.
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