Financial management is the most integral part of any business as it involves planning, organising and controlling the financial activities in a systematic manner so that the business can achieve their organisational goals. In this ever evolving business world it has become one of the major task for an organisation to manage their financial resources. However due to drastic changes in business environment the organisations are unable to manage the financial resources in an optimum manner and are lacking skills in managing the flow of funds.
In this article we will discuss about various challenges faced by the organisations in managing their finance.
1. Financials Planning: –
Companies major problem with financial planning is that they are unable to prepare a proper budget and sticking to the financial plan which leads to overspending of funds.
2. Cash Flow Management: –
To have a proper control over the organisations fund, a healthy cash flow is required. Many organisation are unable to maintain proper flow of funds which affects their ability to pay off bills and operate efficiently.
3. Regulatory Compliance: –
For larger organisation it has become a challenge to comply with the financial reporting and regulatory Compliances as it has become more complex and stringent. Many organisation may fail to comply with the regulatory compliances which can result in fines and penalties which will affect the financial management of the organisation.
4. Change in Technology: –
In this technology driven era it has become very difficult for organisation to keep up with the rapidly advancing financial technology. However, every organisation doesn’t have the ability to adapt with technological advancement as it requires heavy investment in adoption of technology and providing training for the same.
5. Debt Management: –
One of the fundamental aspect of financial management is managing the debt of the organisation in an effective manner as many organisation rely on the debt for their day to day functioning and growth. It has become a challenge for the organisation to maintain a healthy debt to equity ratio.
6. Capital Allocation: –
To maintain proper financial health of an organisation, allocation of capital is a crucial part as it will decide whether the funds must be utilised for expansion, acquisition or for research and development. If proper funds are not allocated, then it will have an impact on the financial health of the organisation.
7. Fund raising: –
Most challenging part for any organisation is raising fund. As it plays an important role in sustainability of the organisation and helps organisation to achieve their goals. Due to increase in competition the organisation is facing challenge in raising funds for their day to day operations and growth.
To overcome the challenges often organisation rely on the financial experts as they have a keen knowledge of the finance and help organisation to make proper financial decisions for the organisation. The financial expert can help organisation to maintain a healthy cash flow, debt to equity ratio and helps organise funds for the organisation. However, the changes in business environment and consumer behaviour will be a major challenge for the organisation to overcome, this challenges can be mitigated by having flexible financial budget. To conclude organisation must be adaptable to new technologies and enhance their financial health so that the organisation can achieve their strategic objectives.
(This article represents the views of the authors only and does not intent to give any kind of legal opinion on any matter)
Authors: Parth Bhikadiya | Consultant |+firstname.lastname@example.org