Business Management Lesson: Financial Management

Key Knowledge Point 2.1.3

• Unit 2, Area of Study 1, Key Knowledge Point 3
• Focus: Importance of establishing bank accounts, financial control systems, and record-keeping strategies.

Importance of Financial Management

• Objective: Manage business finances effectively to make a profit.
• Revenue: Generated from investments or selling goods/services.
• Costs: Include purchasing resources, utilities, wages, and bills.
• Profit: Revenue - Costs.

Poor Financial Management Examples

• Storing revenue/profit under the mattress or in the backyard.
  • Risks: Theft, fire, loss.
  • Lack of clarity on how much money is there.

Smarter Financial Management Strategies

• Business Bank Accounts:
  • Separate personal and business finances.
  • Legal requirement for partnerships, incorporated companies, and social enterprises.
  • Sole traders: Not legally required but strongly advised.

Choosing a Business Bank Account

• Factors to Consider:
  • Fees and interest rates.
  • Overdraft facilities.
  • Credit services (e.g., business credit cards).
  • Bank convenience: Customer service, personal banker, ATM distribution, online services.

Financial Control Systems

• Purpose: Control who has access to business finances.
• Bank Accounts: Secure and controlled access.
• Internal Policies:
  • Authorized individuals for financial access.
  • Segregation of duties and financial management roles.
  • Keeping complete and accurate records.
• Systems and Practices:
  • Budgeting, cash flow management, inventory control, auditing.

Record Keeping Strategies

• Importance: Maintain thorough financial records for tax obligations and profit management.
• Key Records:
  • Revenue sources and allocation.
  • Cost tracking and payment status.
  • Profit allocation and future plans.
• VCA Accounting: Subject focused on financial record-keeping.

Summary

• Maintaining Financial Records: Ensures security and transparency.
• Paying Taxes: Facilitated by accurate record keeping.
• Profit Management: Ensures that the business remains profitable by tracking revenue and costs.
• Secure Financial Control Systems: Prevent fraud, mismanagement, and over-expenditure.

End of Lesson