At the end of this presentation you will understand the essentials of financial management including building blocks and tools of financial management; accounting records; financial planning and monitoring; managing audits and how to safeguard your assets (internal control)

1. FINANCIAL MANAGEMENT
ESSENTIALS
BY: DAMILOLA MAKANJUOLA
FOR : PRESTON HEALTHCARE CONSULTING LTD
DATE 10TH NOVEMBER, 2017

2. Outline
•Objectives
•Introduction/ Importance of financial management.
•Building blocks and Tools of Financial management.
•Understanding Accounts (Accounting Records)
•Financial Planning.
•Financial Reports (monitoring).
•Safeguarding your assets(Financial/internal control)
•Managing Audit
•Conclusion
•References

3. Objective
•The aim of the class is to develop necessary skills and understanding
needed to apply appropriate concepts, techniques and approaches for
sound decision-making in financial management: To enable students to
analyze financial situations and offer solutions to financial management
problems.

4. Introduction
Financial management entails planning, organizing controlling and
monitoring the financial resources of an organization to achieve objectives.
In practice , financial management is all about looking after the financial
health of an organization, not leaving things to chance. This includes
1. Managing scarce resources (limited funds)
2. Managing risk (e.g withdrawal of funds by a donor)
3. Managing strategically (the bigger picture)
4. Managing by objectives (organization objectives)

5. Importance of financial management
1. To be accountable to the people that give us money.
2. To be able to produce financial statements for regulatory bodies.
3. To minimized fraud , theft and abuse of recourses.
4. To plan for the future and become more financially secure
5. To enable management to make good decisions.
6. To achieve the objectives of the organization.
7. To enhance the credibility of the organization.
8. To get value for money.

6. Who is responsible for financial management
Board of Directors
Executive Directors/CEOs
Managers
All staff

7. Four building blocks of financial management
Accounting
Records
Financial
Planning
Financial
Monitoring
Internal
control

8. Four building blocks of financial management
There are no specific models to suit any organization but there are four building
blocks which an organization must put in place
Accounting records: Accurate records of financial transactions to show how
funds are been used
Financial planning: This is linked to strategic and operational plan.
Financial monitoring: Internal budget monitoring helps managers and budget
holder to monitor progress of projects
Internal control: This helps to safeguard organizations asset and manage
internal risk

9. Tools of financial management

10. Tools of financial management
There are many tools which an organization can use to achieve good practice in financial management.
We can identify these tools under each of the four functions of financial management
1. Planning: Strategic plan, business plan, activity plan, work plan, feasibility study
2. Organizing: The recourses of the organization (staff, volunteer, vehicles, property, money) have to
be coordinated to ensure implementation of the overall plan.
Tools: Constitution, organization chart, job description, financial manual etc.
3. Controlling: checks and balances are essentials to ensure proper application of resources.
Tools (delegated authority, procurement procedure, reconciliation.
4. Monitoring: This involves comparing the actual from the budgeted.
Tools: Evaluation report, budget monitoring report, project report, donor report, audit report

11. Accounting Records (Understanding Account)
Good financial records are the basis for sound financial management of an organization.
There are two main methods of keeping accounts.
Cash accounting: This is the simplest method of book keeping and does not require advance
accounting skills.
Notes:
Payment transactions are recorded in a bank or cash book (expenses as at when they are paid and
income as at when they are received
The system takes no account of time lags and any bills which might be outstanding.
The system does not automatically maintains liabilities and assets
The system cannot record non-cash transactions( e.g donations in kind or depreciation)

12. Accounting Records (Understanding Account)
Good financial records are the basis for sound financial management of an organization.
There are two main methods of keeping accounts.
 Accrual Accounting: This involves double entry book keeping i.e. debit and credit entry
Notes:
Expenses/income are recorded in the general ledger as they are incurred/earned rather than when
paid for or received.
The system can deal with all types of transaction.
The system automatically builds in up to date information on assets and liabilities.

13. Accounting Records (Understanding Account)
Financial statement: financial statement are produced from the organization accounting records they
are simple summary of all the transactions for a specific period of time and it shows the financial
position of an organization.
The income and expenditure or the profit and loss account:
All category of income and expenditures within the period
All income not yet received but belong to that period
All payment not yet paid but belong to that period.

14. Accounting Records (Understanding Account)
Balance sheet: The purpose of balance sheet is to assess the financial position (net worth) of an
organization within a specified period. The components of balance sheet includes
Assets
Fixed Assets: Tangible long term (more than a year) assets such as properties, plants, equipment (PPE)
Current Assets: This are more liquid assets such as cash, prepayment (rent), stocks.
Intangible Assets: This are asset you cant see or touch e.g. software's.

15. Accounting Records (Understanding Account)
Liabilities: Liabilities are divided into long term and short term
Current or short term liability: This includes outstanding payments and short term borrowing (those
having to be paid within 12 months eg account payable, income taxes etc.
Long term liability: Loans that needed to be paid after 12 month eg Bond, mortgages
Reconciliation: is the process of matching the balances in an firms' accounting records for a cash
account to the corresponding information on a bank statement.

16. Accounting Records (Understanding Account)
Source document: They get their name from the fact that they are the origin of the information that is
recorded into the accounting books.
The documents come in all sorts of shapes, sizes, colors and types of paper. There is no right or wrong
format. Every document has a few things in common such as:- The transaction date, The amount, The
name of both businesses/people, A reference number, A description of the transaction. Examples are;
Quotes, Orders, invoices, cheques, receipt, deposit slips, loan or lease terms etc.

17. Financial planning
Financial planning is both a strategic and operational process linked to the achieving of objectives. It
involves building longer term funding strategies and short term budget and forecast. It lies at the heart
of effective financial management.
Vision
Mission
Objectives
Strategies
Activity plans

18. Financial report Financial Monitoring)
Financial report: One of the main reasons for keeping accounting records is to access information
about how the organization is running. Financial reporting is the process of producing statements that
disclose an organization's financial status to management, investors and the government.
There are different reports for different users:
Programme management Stakeholder accountability
Internal Budget monitoring report, forecasting report,
Cash flow report
Board report
External Donor progress report (financial and
narrative)
Donor Report
Audited financial statements
Annual report

19. Financial report (Financial Monitoring)
Who needs financial Information
Stakeholders Why do they need it?
Project staff To no how much money and resources are available for their projects and what has been
spent so far
Managers To keep an eye on how project funds are being used (budgeted /actual)
Finance staff To monitor inflow and outflow of funds to ensure availability of resources
Board of trustees To keep an eye on how resources are being used to achieve organization objective
Donors To make sure that there grants are being used as agreed and that project objectives are
fulfilled
Government To ensure that the organization pays any taxes due

20. Safeguarding your Assets (financial control)
•Financial controls play an important role in ensuring the accuracy of
reporting, eliminating fraud and protecting the organization's resources,
both physical and intangible.
A good way to set up your internal control system and procedure is to use
the four actions approach.
1. Direct: This is to encourage the right action
2. Prevent: To deter the wrong actions
3. Detect: Identify if and where it has gone wrong
4. Correct: Put right the errors or losses detected

21. Financial control (Safeguarding your Assets )
1, DIRECT (Before)
Budgets
Code of conduct
Delegated authority
Disciplinary policy
Finance manual
Job descriptions
Induction training

22. Financial control (Safeguarding your Assets )
2, PREVENT (During)
A safe for valuables
Authorization limits
Computer password
Separation of duties
Vehicle logs, insurance cover
Quotation for large purchase

23. Financial control (Safeguarding your Assets )
3, DETECT (Ongoing)
Bank reconciliation
Budget monitoring reports
Cash count, fixed asset register
Stock count
External and internal audit

24. Financial control (Safeguarding your Assets )
4, CORRECT (After)
Act on audit recommendations
Correct errors in the records
Revise policy and procedures
Refresher training

25. Managing Audit
An Audit is an independent examination of records, procedures and activities of an organization,
resulting in a report on the findings. There are two main types of auditing
Internal audit:
Undertaken for the benefits of those inside the organization i.e. management.
The independent review will include but not limited these range of checks
1. Financial accounting system and procedures
2. Management accounting system and procedure
3. Internal control mechanism

26. Managing Audit
External audit:
This is an independent examination of the financial statements prepared by the organization. It is
usually conducted for statutory purposes
The purpose will include but not limited these range of checks
1. To act as a fraud/mismanagement investigation.
2. To certify that the prepared accounts are done based on standard.
3. To proof that internal control systems are free of error.
4. To provide a certified report of the financial health of the organization.

27. Managing Audit
Auditors opinion:
A qualified (modified) opinion is a statement issued after an audit is done by a
professional auditor that suggests the information provided was limited in scope and/or the
company being audited has not maintained Generally Accepted Accounting Principles (GAAP).
An unqualified (Unmodified) opinion is an independent auditor's judgment that a company's
financial records and statements are fairly and appropriately presented, and in accordance
with (GAAP)

28. Managing Audit
Auditors opinion:
Unqualified opinion What it says and means
It shows a true and fair view of ….
This is a clean report (unmodified opinion)

29. Managing Audit
Auditors opinion:
Unqualified opinion
(With emphasis of matter)
What it says and means
It shows a true and fair view of …. But followed with a
note.
This is a clean report (unmodified opinion), but followed
with a warning. E.g. to be aware of something

30. Managing Audit
Auditors opinion:
Qualified opinion
(‘subject to’ or ‘except for’)
What it says and means
Except for the matters described above …
But followed with a note.
This is an ok report (Modified opinion), but followed
some issues raised eg some unsupported documents
for expenditure or an incorrect accounting policy

31. Managing Audit
Auditors opinion:
Adverse opinion What it says and means
The financial statement do not present fairly (or give a
true and fair view of ….)
There so many significant errors that the account do
not give a true and fair view (modified opinion).

32. Managing Audit
Auditors opinion:
Disclaimer opinion What it says and means
Because of the significance of the matter described
above… we do not express an opinion on the financial
statement.
Modified opinion. The auditors are unable or unwilling
to give an opinion because the records are so poor or
incomplete.

33. Conclusion
Financial accounting is basically for presenting the financial health of an organization to its
external stakeholders. Board of directors, shareholders, financial institutions, government and
other investors are the audience for financial accounting reports.
Management or managerial accounting is for managers to make decisions concerning the day-to-
day operations of a business.

34. Refrences
Financial management essentials by MANGO (Management Accounting for NGOs).
www.smallbusiness.chron.com
www.accountingtools.com
https://en.wikipedia.org/wiki/Financial_management
www.investopedia.com

35. The End