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Chapter 3

Financial Management
Functions
Ibrahim Sameer (MBA - Specialized in Finance,
B.Com Specialized in Accounting & Marketing)

www.ibrahimsameer.wordpress.com

Managerial Skill
There are certain skills that different managers
should equip with for the smooth functioning of the
organization. These skills are as follows.
Technical Skills
Interpersonal Skills
Conceptual Skills

Technical Skills
These skills include the proficiency & knowledge in
a certain specialized area that can make a
manager technically competent. The ability to plan,
organize, lead & control are included in this set of
skills and the lower level managers should be
equipped with these skills as compared to other
managers.

Interpersonal Skills
The potential to work effectively with the other
people on an individual as well as group basis is
covered in the interpersonal skills. Each level of
manager must possess these skills which help
them in understanding of the behaviors & attitudes
and resultantly in communication with others
effectively.

Conceptual Skills
The capability of thinking & viewing about abstract
things & understanding of conceptualization of
complex situations is included in this set of skills.
The top manager needs these skills most to see
the organization as a whole and also in different
sub units that are working together and having
different relationships with each other.

Resource Mobilization
It is the process of getting resource from resource
provider, using different mechanisms, to implement
the organizations work for achieving the predetermined

organizational

goals.

It

deals

in

acquiring the needed resources in a timely-cost


effective manner.

Why Resource Mobilization


Important?
Ensures the continuation of your organizations
service provision to clients
Supports organizational sustainability
Organizations, both in the public and private
sector, must be in the business of generating new
business to stay in business

Different Types of Budgeting


Budget is just a mere forecast of organization
revenue and expenditure.
Line Item Budget
Formula Based Budget
Zero Based Budgeting

Line Item / Incremental Budget


An incremental budget is a budget prepared using
a previous period's budget or actual performance
as a basis with incremental amounts added for the
new budget period.

Incremental Budget Advantages


This method of budgeting is very easy to
implement and does not entail any complex
calculations. This can be achieved for various
departments without much issue as one does not
need any detailed analysis irrespective of the
department in consideration.

Incremental Budget Advantages


Incremental

budgeting

ensures

continuity

of

funding for the departments without much detailed


analysis of funding requirement.
Incremental budgeting is suitable for companies
where funding requirements are usually fixed or
with little deviation.

Incremental Budget
Disadvantages
Assumes activities and methods of working will
continue in the same way.
No incentive for developing new ideas.
No incentives to reduce costs.

Group Work
Before we move on to the other two budget types,
write down other reservations you may have
against line item budgeting.

Group Work - Answer


Line item budget surely looks easy to design. But
that kind of budget does not reflect any strategic
plan. It is not based on analysis of needs and does
not prioritize anything for institutional development.

Formula Based Budgeting


Another name called for formula based budgeting
is cash budget.

Formula Based Budgeting


This is a budget which plans incomes and
expenditures for a given period of time, as well as
the cumulative effects on institutional cash flow or
cash reserves. Cash budget allows administrators
to foresee the scope and the timings of financial
needs,

which

makes

it

possible

to

justify

borrowings and plan reimbursements. The more


precise the budget, the more it guides managers.

Zero Base Budgeting


Zero-based budgeting in management accounting
involves preparing the budget from the scratch with
a zero-base.

Zero Base Budgeting Advantages


Efficient allocation of resources, as it is based on
needs and benefits rather than history.
Drives managers to find cost effective ways to
improve operations.
Increases staff motivation by providing greater
initiative and responsibility in decision-making.
Increases communication and coordination within
the organization.

Zero Base Budgeting Disadvantages


More time-consuming than incremental budgeting.
Justifying every line item can be problematic for
departments with intangible outputs.
Requires specific training, due to increased
complexity vs. incremental budgeting.

Questions & Answers

What else you want to know?

Thank You

Ibrahim Sameer
Seek knowledge from cradle to grave

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