FINANCIAL RESOURCE MANAGEMENT.pptx

Finance

1. FTVETI Postgraduate Program DEPARTMENT OF TVET LEADERSHIP & MANAGEMENT RESOURCE MANAGEMENT IN TVET COURSE CODE: VPD- 504 ADDIS ABABA ETHIOPIA 1

2. Introduction Address of the teacher: ICT BLDG: 1 st floor, Room 104 email: [email protected] Mobile: [phone] Consultation Hours : Saturday and Sunday Morning >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 2

3. CHAPTER THREE FINANCIAL RESOURCE MANAGEMENT Definition: FRM refers to an effective and efficient allocation and utilization of financial resources corresponding to the achievement of organizational goals. It is a process which includes the major activities that are related to identifying the sources of organizational finance and the how of generating them. Finance is the life blood of any organization It is the most sensitive asset that needs serious attention by all stakeholders It refers to the process of planning, organizing, directing, allocating, distributing, utilizing and controlling of funds in achieving organizational goals >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 3

4. Characteristics of FM i ) FM is an integral part of overall management. Financial considerations are involved in all business decisions. Acquisition, maintenance, removal or replacement of assets, employee compensation, sources and costs of different capital, production, marketing, finance and personnel decision, almost all decisions for that matter have financial implications . Therefore, FM is universal throughout organisations. ii) The central focus of FM is valuation of the firm. Financial decisions are directed at increasing/maximization/ optimizing the value of the institution. 4

5. Cont… iii) FM essentially involves risk-return trade-off. Decisions on investment involve choosing of types of assets which generate returns accompanied by risks. Generally, higher the risk returns might be higher and vice versa. So, the financial manager has to decide the level of risk the firm can assume and satisfy with the accompanying return. Similarly, cheaper sources of capital have other disadvantages. So to avail the benefit of the low cost funds, the firm has to put up with certain risks, so, risk-return trade-off is there throughout. iv) FM affects the survival, growth and vitality/strength of the institution. Finance is said to be the life blood of institutions . The amount, type, sources, conditions and cost of finance squarely influence the functioning of the institution. 5

6. Cont… v) Finance functions focus on investment, raising of capital, distribution of profit, are performed in all firms - business or non-business, big or small, proprietary or corporate undertakings. Financial management is a concern of every intitution including educational institutions. vi) FM is a sub-system of the institutional system which has other subsystems like academic activities, research wing, etc., In systems arrangement financial sub-system is to be well-coordinated with others and other sub-systems well matched with the financial sub-system. 6

7. Cont… vii) FM of an institution is influenced by the external legal and economic environment. The legal constraints on using a particular type of funds or on investing in a particular type of activity, etc., affect financial decisions of the institution. Financial management is, highly influenced/constrained by external environment. viii) FM is related to other disciplines like accounting, economics, taxation, operations research, mathematics, statistics etc., It draws heavily from these disciplines. ix) There are some procedural finance functions - like record keeping, credit appraisal and collection, inventory replenishment and issue, etc., These are normally delegated to bottom level management executives. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 7

8. Types of Finance Business Finance: The term ‘business finance’ is very comprehensive. It implies finances of business activities. The term, ‘business’ can be categorized into three groups : commerce, industry and service. It is a process of raising, providing and managing of all the money to be used in connection with business activities. According to Guthmann & Dougall , business finance can be broadly defined as the activity concerned with planning, raising, controlling and administering of funds used in the business. 8

9. Cont… 1.Direct Finance The term 'direct', as applied to the financial organisations, signifies that savings are effected directly from the saving-surplus units without the intervention of financial institutions such as investment companies, insurance companies, unit trusts, and so on. 2. Indirect Finance The term 'indirect finance' refers to the flow of savings from the savers to the entrepreneurs through intermediary financial institutions such as investment companies, unit trusts and insurance companies, and so on. 3. Public Finance It is the study of principles and practices pertaining to acquisition of funds for meeting the requirements of government bodies and administration of these funds by the government . 4. Private Finance It is concerned with procuring money for private organization and management of the money by individuals, voluntary associations and corporations. It seeks to analyse the principles and practices of managing one’s own daily affairs. 5. Corporation Finance : Corporation finance deals with the financial problems of a corporate enterprise. 9

10. Cont… The nature of finance functions as follows: i) In most of the organizations, financial operations are centralized. ii) Finance functions are performed in all business firms, irrespective of their sizes / legal forms of organization. iii) They contribute to the survival and growth of the firm. iv) Finance function is primarily involved with the data analysis for use in decision making. v) Finance functions are concerned with the basic business activities of a firm, in addition to external environmental factors which affect basic business activities, namely, production and marketing. vi) Finance functions comprise control functions The central focus of finance function is valuation of the firm. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 10

11. Finance Function 1. Assessing the financial requirements . The main objective of finance function is to assess the financial needs of an organization and then finding out suitable sources for raising them. 2. Proper utilisation of budget : Though raising of funds is important but their effective utilisation is more important. The budget should be used in such a way that maximum benefit is derived from them 3. Increasing profitability. 4. Maximising value of the institute. >> 11

12. The operational functions of finance includes : Financial planning : The first task of a financial manager is to estimate short term and long-term financial requirements of his/her business Deciding the capital structure : The capital structure refers to the kind and proportion of different securities for raising funds. Selection of source of finance: After preparing a capital structure, an appropriate source of finance is selected. Various sources from which finance may be raised, include: share capital, debentures, financial institutions, commercial banks, public deposits, etc. Selection of pattern of investment: When funds have been procured then a decision about investment pattern is to be taken. The selection of an investment pattern is related to the use of funds. 12

13. Function of Finance Manager Formulation of objectives Estimating the financial requirement Efficiently manage entity resources Effectively mitigate risks to attain entity objectives Maintain a sound financial condition within the limits of available resources Comply with applicable policies, laws and regulations Forecast and manage of cash Raising budget Managing the flow of internal revenue Financial controls Forecasting profits Managing assets Managing budget 13

14. FM as Science or Art Financial management is both a science and an art. Its nature is nearer to applied sciences as it envisages use of classified and tested knowledge as a help in practical affairs and solving business. Theory of FM is based on certain systematic principles, some of which can be tested in mathematical equations like the law of physics and chemistry. Financial management contains a much larger body of rules or tendencies that hold true in general and on the average. The use of computers, operations research, statistical techniques and econometric models find wide application in financial management as tools for solving corporate financial problems like budgeting, choice of investments, acquisition or mergers etc. This takes the FM nearer to treatment as a subject of science. 14

15. Cont… According to George knowledge of facts, principles and concepts is necessary for making decisions but personal involvement of the manager through his/her intuitive capacities and power of judgment becomes essential. As the application of human judgment and skills is also required for effective financial management, financial management is also an art. In the entire study of financial management whether it is related to investment decisions, financing decisions i.e. deciding about the sources of financing, or dividend decisions, there is a mixture of science as well as art. When techniques for analytical purposes are used, it is science and when choice is application of the results it is an art. 15

16. objectives of FRM a) To build up reserves for growth and expansion b) To ensure a fair return to shareholders To ensure maximum operational efficiency by efficient and effective utilization of finances. d) To Ensure regular and sufficient supply of capital to the business. e) To Ensure a fair rate of return to the suppliers of capital. f) To Ensure better utilization of capital by following the principles of profitability. g) To Coordinate the activities of the finance department with those of other departments of the institute. The achievement of central goal of maximisation of the owner's economic welfare depends upon the adoption of two criteria: i ) profit maximisation; and (ii) wealth maximisation 16

17. FINANCIAL PLANNING Financial planning is apart of overall planning of any business/institution Financial planning involves: 1. Determination of the amount of capital required 2. Determination of capital structure or kinds and proportion of different types shares. 3. lay dawn of policies in regard to cash control, borrowing and lending etc. 17

18. Considerations in financial plans 1. Objectives: objectives are the ends towards which the activities of the institute is aimed. The objectives of financial management should be so determined that they are consistent with the overall organizational objectives. The objectives of financial management are the procurement of funds at the cheapest cost and the utilization of funds in the best possible manner to maximize the earnings of the enterprise. 2. Survival and Growth : The financial plans should be so devised that they do not jeopardize the survival of the institute. The institute should be solvent both in the short- and long run. The financial planning should also be aimed at the growth of the institute through better financial decision. 18

19. Cont… 3. Independence : The financial planning should aim at earning sufficient earnings and retaining a part of earnings in to the institute. This will reduce dependency on outsiders. If an Institute is highly dependent on external sources for or budgets, they will interfere with the working of the organization. 4. Solvency and liquidity (Profitable): The financial plan should be so created that the Institute is solvent and does not lack liquidity both in the short and long run. The funds should be invested in the profitable channels only. Sufficient funds should also be made available to meet the working capital requirements of the firm. 5. Flexibility: the financial plans of the business should be flexible and not rigid. Whenever new opportunities suddenly arise, the financial planning should have scope of making use of such opportunities. It should allow the diversion of budget in to more profitable channels. The management should also be able to raise more finance at a short notice to finance new projects. 19

20. Financial Decisions Finance comprises of combination of knowledge of credit, securities, financial related legislations, financial instruments, financial markets and financial system. The financial manager must find a rationale for answering the following three questions: 1) How large should an Institute , College be and how fast should it grow? 2) In what form should it hold its assets? 3) How should the funds required be raised? 20

21. Types of Financial Decisions Financial decisions refer to decisions concerning financial matters of a business firm or Institution . It can classify these decisions into four major groups : 1. Investment decisions :Investment decision relates to the determination of total amount of assets to be held in the firm, Institute the composition of these assets and the business risk complexities of the firm as perceived by the investors. The investment decisions can be classified under two broad groups ; long-term investment decision and Short-term, investment decision. The long-term investment decision is referred to as the capital budgeting and the short-term investment decision as working capital management. 21

22. Cont… 2. Financing decision : Once the firm/ Institute has taken the investment decision and committed itself to new investment, it must decide the best means of financing these commitments. 3. Dividend decision : The dividend decision is concerned with the quantum of profits to be distributed among shareholders. 4. Liquidity decisions : the ability of the firm to meet bills and the firm’s or Institute cash reserves to meet emergencies.>>>>>>>>>>>>>>>>>>>>>>> 22

23. Factors Influencing Financial Decisions A. External factors Capital structure Capital market and money market State of economy Requirements of investors Government policy Taxation policy Financial institutions / banks lending policy 23

24. Cont… B. Internal factors Nature of business/Institution Age of the firm/Institution Size of the business /Institution Extent and trend of earnings Liquidity /Payment position Working capital requirements Composition of assets Nature of risk and expected return. >>>>>>>>> 24

25. Financial Statement A written report of the financial condition of a firm. Financial statements include the balance sheet , income statement , statement of changes in net worth and statement of cash flow . . The first step in developing a financial management system is the creation of financial statements . To manage proactively, you should plan to generate financial statements on a monthly basis . The financial statements should include an income statement , a balance sheet and a cash-flow statement. 25

26. Income Statement Simply put, the income statement measures all the revenue sources vs. organization expenses for a given time period . Example in outlining the major components of the income statement: Sales. This is the gross revenue generated from the sale of clothing less returns (cancellations) and allowances (reduction in price for discounts taken by customers). Cost of goods sold. This is the direct cost associated with manufacturing the clothing. These costs include materials used, direct labor, plant manager salaries, freight and other costs associated with operating a plant (for example, utilities, equipment repairs, etc.). Gross profit. The gross profit represents the amount of direct profit associated with the actual manufacturing of the clothing. It's calculated as sales less the cost of goods sold. 26

27. Cont… Operating expenses. These are the selling, general and administrative expenses that are necessary to run the business. Examples include office salaries, insurance, advertising, sales commissions and rent. Depreciation. Depreciation expense is usually included in operating expenses and/or cost of goods sold, but it is worthy of special mention due to its unusual nature. Depreciation results when a company purchases a fixed asset and expenses it over the entire period of its planned use, not just in the year purchased. Whether depreciation is included in cost of goods sold or in operating expenses depends on the type of asset being depreciated. Depreciation is listed with cost of goods sold if the expense associated with the fixed asset is used in the direct production of inventory. Examples include the purchase of production equipment and machinery and a building that houses a production plant. 27

28. FACTORS THAT INFLUENCES FRM 1. Economic environment 2. Political environment 3. The social environment and 4. Technological environment Discuss how the above factors influence FRM? Sources of financial resources  The government budget (public funding)  private funding  Community contribution  Internal income of organizations {List the income generating system of your institute} >>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 28

29. BUDGETING It is a financial document used to project future income and expenses. It is a set of interlinked plans that quantitatively describe an entity's projected future operations. It is a financial plan for the future concerning the revenues and costs of a business. The budgeting process may be carried out by individuals or by Institute to estimate whether the person/Institute can continue to operate with its projected income and expenses. It is the most prevalent planning and control techniques in resources management in an organization. It is a statement, in dollars, birr or whatever currency, showing the revenue and expenditure that an organization plans to receive or to expend in the next fiscal year. 29

30. Cont… Budgetary control is the process by which financial control is exercised within an organization. Budgets for income/revenue and expenditure are prepared in advance and then compared with actual performance to establish any variances . Managers are responsible for controllable costs within their budgets and are required to take remedial action. 30

31. Use of Budget Budgets are used to: Control income and expenditure Establish priorities and set targets in numerical terms Provide direction and co-ordination, so that business objectives can be turned into practical reality Assign responsibilities to budget holders (managers) and allocate resources Communicate targets from management to employees Motivate staff Improve efficiency Monitor performance 31

32. Guiding principle for budgeting In an effective budget system: Managerial responsibilities are clearly defined – in particular the responsibility to adhere to their budgets Individual departments budgets lay down a plan of action Performance is monitored against the budget Corrective action is taken if results differ significantly from the budget Departures from budgets are permitted only after approval from senior management Helps all types of organization to plan and control their operations, and to support their managerial strategies 32

33. Cont… The budgeting process typically begins with a strategy planning session by senior management. The management team then applies the agreed strategic direction to a series of plans that roll up into a master budget. The plans include a sales budget , production budget , direct material budget , direct labour budget , manufacturing overhead budget , sales and administrative budget , and fixed assets budget . All of these plans roll up into the master budget, which contains a budgeted income statement, balance sheet, and cash forecast. 33

34. Types of budget Master budget. At the top of the cascade is the master budget, a suite of statements with strong similarity to the published financial accounts. This budget consolidates all subsidiary budgets and usually comprises the budgeted profit and loss account, balance sheet and cash flow statement. Cash budget. This is a detailed budget of estimated cash inflows and outflows incorporating both revenue and capital items . Capital budgeting. This is a process concerned with decision making in respect of specific investment project choices and the total amount of capital expenditure to commit . Operating budget. This is the budget of the revenue and expenses expected in a forthcoming period. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 34

35. Budget decision In terms of managerial or control issues, budgets may be: 'Top-down' (imposed). 'Bottom-up' (or participative) budgets. 'Parallel' (or negotiated) budgets. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 35

36. Features of an effective budget Accurate forecasting Based on organisational goals Information is timely and accurate Formed with multilevel input Regular reviews >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 36

37. CAPITAL BUDGETING DECISIONS Capital budgeting decisions are of paramount importance in financial decisions, because efficient allocation of capital resources is one of the most crucial decisions of financial management. Capital budgeting is budgeting for capital projects. It is significant because it deals with right kind of evaluation of projects. 37

38. Capital Expenditure A capital expenditure is an expenditure incurred for acquiring or improving the fixed assets, the benefits of which are expected to be received over a number of years in future. The following are some of the examples of capital expenditure. 1) Cost of acquisition of permanent assets such as land & buildings , plant & machinery , goodwill etc. 2) Cost of addition, expansion, improvement or alteration in the fixed assets. 3) Cost of replacement of permanent assets. 4) Research and development project cost etc. 38

39. Capital investments Factors that give rise to the need for capital investments are: Expansion Diversification Wear and tear of old equipment Productivity improvement Learning Replacement and modernization 39

40. Capital investment proposals involve: a) Longer gestation period b) Substantial capital outlay c) Technological considerations d) Irreversible decisions e) Environmental issues 40

41. Steps involved in the capital budgeting process (1) Project generation: In a dynamic and progressive firm there is a continuous flow of profitable investment proposals. (2) Project evaluation: Project evaluation involves two steps: i ) estimation of benefits and costs and ii) selection of an appropriate criterion to judge the desirability of the projects. (3) project selection and (4) project implementation: After the final selection of investment proposals, funds are earmarked for capital expenditures. 41

42. Factors Influencing Investment Decisions Technological change Competitor' strategy Demand forecast Type of management Fiscal policy 42

43. The capacity to acquiring budget depends on following factors: Nature of the Institute / business Tenure/term of services Reputation and credibility acquire Types of services offered Cost of production and generation of services most likely set of users or beneficiaries Type and nature of stakeholders Willingness and ability of users and beneficiaries to pay for the services offer Continuity or perpetually of demands for services Internal strength of institute to generate its own funds Support or kind assistance available 43

44. The acquisition of budget is also determined by: Philosophy of the institute Vision, mission and goals of the institute Regulatory framework Competitive environment 44

45. Kinds of Budget Nomenclature Nomenclature based on function of the state Enables to picture out the details of the functional plan as it makes the analysis of the expenditures for each functions possible. It also allows the determination costs for each public functions combining functional classification with the economics classification. Moreover, it helps to identify the state priorities assigned to the different functions. B. Nomenclature based on service or management unit Concerns all public sector units at different levels (central, regional or local) or the independent once. It shows the nature of the spending and the responsible body that is in charge of the money at the various echelons of the system. It is essential and should be clearly defined particularly under decentralized administration system as it aims to ensure accountability; budget administration and legal appropriation. 45

46. Cont… C. Nomenclature based on programs and activities Establish the link between expenditures and expected results. Its main aim is policy formulation and performance accountability. It clearly indicates the expenditures required in line with the programs and activates to be carried out. It allows helps to facilitate the cost benefit analysis for better decision makings though measuring benefits. D. Nomenclature based on the type of expenditure Helps to plainly distinguish between recurrent and capital expenditures. It facilitates budget control as it identifies expenditures by economic object. It creates uniform concepts of expenditures among all public sectors and makes information arranged for budget commitments. 46

47. PHASES OF BUDGET PROCESS Three main phases are : budget preparation, adoption and execution. The preparation phase of budget is the base for decisions reflecting budget priorities for the coming year based on the development plans and objectives of the government. It is the stage at which a budget request or plan can be strengthened because the proposed budget that the members of the legislature examine; change and ultimately pass based on it. 47

48. Cont… The second phase of a budget process is related to the parliament vote( adoption). The budget should be voted before the end of the elaboration period. It is primarily a legislative branch function. The legislature involves agencies as necessary in the process by holding hearings on budget issues affecting each agency. The final products of this process are the enrolled budget bills, state laws. 48

49. Cont… The legislature may modify the budget through supplemental appropriations, which legally have the same form as the regular appropriations, an act. The parliament usually uses a highly qualified and experienced financial experts and economic advisors before voting to the budget, and sometimes seek for clarification before decisions. 49

50. Cont… The third phase (budget execution) of the budget process is related to the implementation of the budget allocated to each sector. In line with the implementation, countries do have their own principles and methods of public accounting. These principles are usually developed by the ministry of finance to assure the implementation of operations as per the initial authorization of credits given by the parliament. 50

51. Cont… In general, the implementation of budget should be done as per the budget line described by the nomenclature and the rules and regulations developed by MoF as per the vote of the parliament. Thus, educational decisions made at this stage require actual budget, capacity, good governance, transparency and accountability at the various echelons followed by strong monitoring and controlling mechanisms. 51

52. Steps in budgeting The major steps in budgeting include: 1.The budget message : This step refers to the plan. It deals with the institute goals and objectives of the organization system. the expenditure plan: expenditures refers to estimation of the amounts required to plant the institute plan into effect. After defining the organizational plan, expenditures and revenues estimates should be done. However, this requires some detail activities which are strongly related to preparation of time schedule, collection of data as well as estimation and classification of expenditures. 52

53. Cont… 2. The revenue/income plan : refer to the incomes of an organization. The actual expenditure of institute depends on the amount of income collected from the anticipated revenues from various sources as per plan. The revenue plan should reveal an estimate of approximately actual receipts from different sources. balancing expenditures and revenues: In most cases, activities are strongly related to the balance between the income and expenditure side of an organization. Creating balance between two sides demands anticipating revenues from the various sources. This in turn will help to have a sound plan for organizational expenditure by creating balance with anticipated revenues. 53

54. Cont… 3. Budget approval : Can be done at various levels. budget prepared should be presented to the highest administrative body of the organization . The highest administrative body in the system could accept, modify or reject the proposed in fact with justification. Budget administration and the budgetary review: The actual implementation of the allocated budget. 54

55. Characteristics of finance function in educational institution Finance function is focused at systematic acquisition and development of funds The purpose of finance function is stabilization of financial position. Sources of finance in educational institution are restricted by nature. It is because of regulatory frame work for governance the educational institute. The principle source of revenue for educational institute are related with fees and certain other sources like grant in aid, donations etc. The fees are defined by the regulatory institution. As such the education institution cannot change fees more than as what is guided by regulatory institute or bylaws of institute. It is not the discretion of the institute to revise the fees at will. Educational institution cannot take unspecified fees without prior permission of the regulatory bodies. 55

56. Features of financial environment in educational institution Educational institution usually works out for profits. This non profit motive of educational institution changes their finance. As such, their approach towards finance is very narrow and restricted. As these institutes do not work for profit, the fund management system do not focused on higher revenue generation or generation of extra surplus. There is no owner’s equity and concept of profit sharing in a conventional manner in educational institution or public charity institute. Therefore generation of revenue is not the prime function of these institutes. The concept of finance is driven by resource utilization and not by resource generation. The concept of wealth maximization is not also implemented in large scale because maximization of wealth is not the prime motive of these institutes. 56

57. Cont… The conventional educational institution also does not give priority t rapid or large scale expansion. Often most of the institute continues with same scale and mode of functioning. Retention of earnings and creating of reserves has also a limited scope. The type of financial information required by this institute is very limited because of low dimensions and limited flexibility in approach. The stake holders are diversified in nature and have different ends to meet. However, none of the stake holders have any financial purpose to perceive. 57

58. Discussion questions Discuss in group the utilization of budget in your organization? What are the challenges encountered? Recommend possible solutions to minimize the challenges? 2. How do you generate income to subsidize the expenditure? >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 58

59. Auditing Auditing is an examination of books of accounts and vouchers of business, as will enable the auditors to satisfy him/her self that the balance sheet is properly drawn up, so as to give a true and fair view of the state of affairs of the business. Auditing is an examination of accounting records undertaken with a view to establish whether they correctly and completely reflect the transactions. 59

60. Cont… Audit is a systematic and scientific examination of the books of accounts of a business . Audit is undertaken by an independent person or body of persons who are duly qualified for the job. Audit is a verification of the results shown by the profit and loss account and the state of affairs as shown by the balance sheet. Audit is a critical review of the system of accounting and internal control 60

61. OBJECTIVES OF AUDITING i . Report to the manager whether the balance sheet gives a true and fair view of the Institute's state of affairs and the profit and loss. ii. Detection and prevention of Errors. 61

62. Merits of Auditing Detection of errors Evaluate financial status Loan from banks Builds reputation Proper valuation of investments Settlements of claims Proper valuation of assets Good security and Evidence in court Government acceptance and Settlement of accounts Update accounts . Suggestions for improvement Facilitates taxation 62

63. Demerits of Auditing Non-detection of errors/frauds: Auditor may not be able to detect certain frauds which are committed with calm intentions. Dependence on explanation by others: Auditor has to depend on the explanation and information given by the responsible officers of the company. Audit report is affected adversely if the explanation and information prove to be false. Dependence on opinions of others : Auditor has to rely on the views or opinions given by different experts, Lawyers, Engineers, Architects etc. 63

64. Cont… Conflict with others: Auditor may have differences of opinion with the accountants, management, engineers etc. In such a case personal judgment plays an important role. It differs from person to person. Corrupt practices to influence the auditors: The management may use corrupt practices to influence the auditors and get a favorable report about the state of affairs of the organization. Detailed checking not possible: Auditor cannot check each and every transaction. 64

65. QUALITIES OF AN AUDITOR In addition with his/her formal qualification, he/she should be concerned with the reporting on financial matters of business and other institutions. The qualities required are tact, caution, firmness, good temper, integrity, discretion, industry, judgment, patience, clear headedness and reliability. In short, all those personal qualities that goes to make a good businessman contribute to the making of a good auditor. He/she must have the highest degree of integrity backed by adequate independence. 65

66. Cont… He/she must have a thorough knowledge of the general principles of law which govern matters with which he/she is likely to be in intimate contact. Needless to say, where undertakings are governed by a special statute, its knowledge will be imperative; in addition, a sound knowledge of the law and practice of taxation is unavoidable. The auditor should be equipped not only with a sufficient knowledge of the way in which business generally is conducted but also with an understanding of the special features peculiar to a particular business whose accounts are under audit. The auditor, who holds a position of trust, must have the basic human qualities apart from the technical requirement of professional training and education. 66

67. Brain storming question Evaluate the practice of FRM of your organization? What are the challenges observed in your institute? Indicate the possible solutions to alleviate the challenges observed in your organization? 2. Reflect on FRM of the Ethiopian context? 3. List the challenges observed in the practices of auditing in your institute? >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 67

68. CHAPTER FOUR TIME MANAGEMENT - MEANING AND ITS IMPORTANCE Failing to plan … is planning to fail How do you go about managing your time? 68

69. Time Management (TM) Time management is the act of taking conscious control over the amount of time spent on specific activities. Helps to increase productivity, effectiveness and efficiency. Time management is about effective scheduling of time, goal setting, prioritizing and choosing what to do and what not to do, delegating tasks, analyzing and reviewing spent time, organizing work space, keeping concentration and focus at work, motivating to work towards a goal. 69

70. Five basic principles Be realistic about the task….how long will it take? Be determined …..limit distractions/displacement Be organised ………books, pens, coffee Balance the other parts of your life Be flexible …things may change 70

71. Taking control of time Ask yourself from time to time: How am I using my mental and physical energy now? Is this good use of my time? Identify priorities/commitments for the week ahead and write on blank sheet all sessions/ meetings; leisure activities; paid work; time for self; adequate rest/sleep. 71

72. Use personal timetabling to: acknowledge what you have achieved save mental energy be purposeful and realistic meet deadlines and keep up with work have effective study time and effective relaxation Enjoy yourself without guilt and worry 72

73. Strategies to move forward Set goals realistic, reachable, sequential Experiment with standards for success Try for 80% or even 60% Focus on the process not the end result Evaluate success in terms of what you accomplished and what you enjoyed Celebrate and learn from mistakes 73

74. Time Management includes: i . Effective Planning ii. Setting goals and objectives iii. Setting deadlines iv. Delegation of responsibilities v. Prioritizing activities as per their importance vi. Spending the right time on the right activity 74

75. Time Management Skills 1. Stay organized 2. Learn to prioritize 3. Be punctual and disciplined. 4. Take ownership of work 5. Be a little diplomatic 6. More focused 7. Be reasonable 8. Do not over burden yourself 9. Remember time once gone never comes back 10. The rules and regulations of an organization are not only meant for subordinates but also for team leaders and superiors. 75

76. Cont… 11. Ask your employees to keep their work stations organized.. 12. Ask your administration supervisor to issue notepads, registers, pens, folders etc to all your employees. . 13. Delegate them responsibilities as per their specialization, educational qualification and background. 14. Keep a track of employee performance. 15. It is essential for the superiors to know what their employees are up to. 16. Promote various training programs to in still time management skills in employees. 17. Be a good listener. 76

77. How to practice effective time management in organization Know your targets well Organize yourself Be loyal to your organization Plan your things well in advance Keep a notepad and pen handy Be punctual Reach office on time Manage yourself well Use a planner or organizer to plan your day well Leave a little early for meetings outside office Set priorities for yourself Avoid gossiping or loitering around at the workplace Avoid long personal calls during office hours 77

78. Role of Planning in Time Management Time Management plays an essential role in corporate and helps employees to finish off assignments on time. Doing the right thing at the right time is called Time Management. It is essential for an individual to value time as time once lost never comes back, no matter how much money you spend. An individual who fails to deliver results on time is appreciated by none and is never taken seriously at the workplace. Planning plays a pivotal role in effective time management. An individual needs to plan his/her day well in advance to make the best possible use of time . There is no point in working just for the sake of doing work. Planning gives an individual a sense of direction in the organization and motivates him to complete assignments on time. Plan how you want to move forward. It is important for an individual to set a goal and objective for him/herself and work hard towards achieving the same. 78

79. Cont… Detailed planning suggests you the steps towards realizing your goals at the workplace within a defined time frame. Planning helps an individual to know what all he needs to do urgently and what all can be done a little later. To plan things better, employees should prepare a Task Plan where he/she can jot down tasks against the time slots assigned to each activity. High priority activities must come on top followed by the ones which do not require immediate attention. Planning helps to accomplish urgent and critical tasks way ahead of deadline. Plan as to how your day should look like. Develop the habit of using an organizer. It helps to plan things better. Individuals who adopt a planned approach finish off work on time as compared to those who just accept anything which comes there way. 79

80. Benefits of Time Management Time Management makes an individual punctual and disciplined. One becomes more organized as a result of effective Time Management. Effective Time Management boosts an individual’s morale and makes him/her confident Individuals who stick to a time plan are the ones who realize their goals and objectives within the shortest possible time span. Better Time Management helps in better planning and eventually better forecasting. Research says that individuals who accomplish tasks on time are less prone to stress and anxiety. Time Management enables an individual to prioritize tasks and activities at workplace. Time Management helps an individual to adopt a planned approach in life. 80

81. Time Management Techniques Set your Priorities Make sure you finish your assignments within the stipulated time frame Understand the difference between urgent and important work Stay focused 81

82. Cont… Do include time for your tea breaks, net surfing, personal calls and so on in your daily schedule Set realistic and achievable targets for yourself. Do not overburden yourself Be disciplined and punctual Keep things at their proper places Do not treat your organization as a mere source of money. Develop the habit of using an organizer 82

83. Task plan Date ……………… Day ……………… 9 AM - Day Begins 9.15 - 10 AM - Reply urgent emails. 10 AM - 12 noon - Work on client A’s proposal, prepare reports and necessary data. (Most Urgent).Also work on comparative analysis of competitors. (Urgent) 12 Noon - 12.30 PM - Sit and discuss with team members on pending issues (Have to clear all pending work by end of the day). 12.30 - 1.30 PM - Lunch Break (Enjoy with fellow workers). 1.30 - 1.40 PM - Call up spouse. 1.40 - 3 PM - Work on Client B’s Proposal (Still have two days). 3 PM - 4 PM - Sit with Boss for approvals and other critical issues. 4 PM - 5 PM - Call up existing and potential clients. 5 PM - 5.15 PM - Check personal mails. 5.15 - 6 PM - Collate reports and send to immediate reporting Boss. 6 PM - 6.15 PM - Organize Work Station. Day Ends 83

84. Activity 1. What are the reasons why time resource seeks more attention than other resources? 2. Who need to think about time management? Why? 3. What are the misconceptions of time management? 4.Explain what we mean when we say ‘TM is more than just managing time. 5. What are the common resource organizations in the world do have resources in common rather than human resources? 84

85. Individual exercise (25%) Visit TVET institute/College/organization and assess the methods how the institute manages use to manage financial resources and indicate the challenges encountered in the institute . Construct semi-structure interview questions to gather information from the respondents. From your findings what professional suggestions can you recommend to solve the challenges? Consult the updated directives/proclamations of FRM and analyze it. Give professional recommendations for those issues that needs modifications.>>>>>>>>>>>>>>>>>>>>>>>>> 85

86. References Crumb, Chery (2005). Personality styles. http: WWW.ccrumb.com/articles/May 05en.pdf Fogleman G.R (2010). Leadership integrity. New York. Mind tools.com. Resource Management. Articles ,Various , Retrieved April27,2010 Soft copies provided by the instructor Resources from Library and internet END >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 86