Financial Management Seminar for the Agricultural Sector

Transcription

1 Financial Management Seminar for the Agricultural Sector Financial management in agribusiness financing decisions Presentation by: CPA Cliff Nyandoro Technical Services Manager, ICPAK 22 nd November 2017 Merica Hotel, Nakuru Uphold public interest

2 Overview of financial management Financial Management means planning, organizing, directing and controlling the financial activities of the organization. It entails the application of general management principles to financial resources of the enterprise with an oversight in funds utilization. Financial management refers to the efficient and effective management of funds in such a manner as to accomplish the objectives of the organization. It is a specialized function directly associated with the top management. 2

3 Overview of financial management Financial management is important in all types of businesses. This similarly applies to agribusinesses. Responsibilities in financial management include the following: Forecasting and planning Major investment and financing decisions Coordination and control Dealing with the financial markets Risk management All these are critical for an effective financial management function. 3

4 Forecasting and planning The financial staff must coordinate the planning process. Hence they must interact with people from other departments as they look ahead and lay plans which will shape the future of the firm. Financial managers should be at the heart of the strategy of the firm. They must drive the vision and mission of the firm in conjunction with the other departments. 4

5 Major investment and financing decisions A successful firm usually has rapid growth in sales, which requires investments in plant, equipment and inventory. The financial staff must help determine the optimal sales growth rate, and finance people must help decide what specific assets to acquire and the best way to finance those assets. Such decisions include: should the firm finance with debt, equity, or some combination of the two, and if debt is used, how much should be long term and how much should be short term? 5

6 Coordination and control The financial staff must interact with other personnel to ensure that the firm is operated as efficiently as possible. All business decisions have financial implications, and all managers financial and otherwise need to take this into account. For instance, marketing decisions affect sales growth, which in turn influences investment requirements. Hence marketing decision makers must take account of how their actions affect and are affected by such other factors as the availability of funds, inventory policies, and plant capacity utilization. 6

7 Dealing with the financial markets Financial staff must deal with the money and capital markets. Each firm affect and is affected by the general financial markets where funds are raised, where the firm s securities are traded and where investors either make or lose money. In our market, we need to be aware of what happens at the Nairobi Securities Exchange on a daily basis. Consider the case of the Supreme Court decision on the Second Presidential Petition 2017 Ruling on Monday the 20 th November,

8 Dealing with the financial markets 8

9 Risk Management All businesses face risks, including natural disasters such as fires and floods, uncertainties in commodity and security prices, volatile interest rates, and fluctuating foreign exchange rates. However, many of these risks can be reduced by purchasing insurance or by hedging in the derivative market. The financial staff is responsible for the firm s overall risk management program, including identifying the risks that should be hedged and then hedging them in the most efficient manner. 9

10 Decision making Overally, people working in financial management make decisions regarding which assets their firms should acquire, how those assets should be financed, and how the firm should manage its existing resources. If these responsibilities are performed optimally, financial managers will help to maximize the values of their firms, and this will also contribute to the welfare of the consumers and employees. 10

11 Q & A 11