Tag: Need

  • How to Start a Property Management Company? Explain

    How to Start a Property Management Company? Explain

    Start a Property Management Company: Property managers or administrators are employed to deal with the activities, support, and organization of property rentals for a proprietor. Their work, among numerous different errands, incorporates advertising rentals and discovering leaseholders, guaranteeing rental rates are serious while covering duties and overhead, gathering rent, and agreeing with rental laws. Also, Their precise obligations will change dependent on the sort of property being dealt with, the sum they are getting paid, and the details of the management contract. There are some significant jobs a property supervisor can take on to help investment property proprietors.

    Here is the article, How to Start a Property Management Company? Explain and Discuss their Meaning, Definition, Need, Importance, and Functions.

    What does mean Property Management? Meaning and Definition. Property management is the training by which an outsider is given the duty of keeping a home’s the norm and mollifying its inhabitants. Also, Property directors are, along these lines, customarily recruited by investment property proprietors to regulate the day-by-day tasks of their land resources and manage any inquiries or concerns the inhabitants may have. On the occasion the property is empty, it’s the property supervisor’s responsibility to make sure the house is leased. As its name recommends, property management deals with each part of a rental home, from promoting space and marking leases to gathering rent and calling for fixes. Scarcely any procedures, so far as that is concerned, are more valuable for a rental portfolio than recruiting an outsider property administrator.

    Why we Need a Property Management Company?

    Picking whether to utilize property management organizations is a hard choice for some land financial backers. Some wouldn’t fantasy about putting resources into the land without a property management firm set up before finalizing an individual negotiation. Others, nonetheless, the battle to break liberated from the “DIY” mentality that keeps them from achieving more. Incidentally, just something single is sure: utilizing a property management organization isn’t pretty much as evident as I would have gotten a kick out of the chance to accept. If for that alone, I have persuaded the advantages of utilizing a property management organization far exceed the negatives.

    Any reasonable person would agree the contention originates from the expense one should assimilate to work with a property chief, however, I stray. The expense isn’t such a lot of a negative, but instead a venture. While it does, indeed, cost cash to recruit an outsider director, I can guarantee you it’s definitely justified even despite the cost. Also, their inclusion could undoubtedly expand the odds of developing your primary concern. On the off chance that that is adequately not, here is a portion of the significant assignments a decent property management organization will add to your rental portfolio.

    Importance or Benefits of having a Property Management Company:

    Claiming an investment property can be an incredible wellspring of extra pay. Be that as it may, it additionally accompanies the additional duties of property management, including upkeep, fixes, and promoting. In case no doubt about it “do I need a property administrator?” — consider these eight advantages of utilizing a property management organization. A property chief will:

    Screen out issue inhabitants:

    Perhaps the greatest advantage of property management is that the property supervisor will deal with inhabitant screening. Experienced property administrators see hundreds (or thousands) of uses, so their prepared eyes are bound to see potential warnings while evaluating a candidate’s desk work. They’re rapidly ready to spot great occupant characteristics, for example, paying rent on schedule, dealing with the property, and that’s only the tip of the iceberg. Also, Allowing them to deal with the inhabitant screening cycle can improve your odds of handling a dependable leaseholder.

    Go about as the purpose of contact for inhabitant concerns:

    If something breaks at your property, it’s not generally advantageous or conceivable to roll over to the unit to investigate it yourself (particularly if it’s in another town or state). A property chief can address issues at the entire hours of the day and mastermind a specialist organization to fix or supplant the thing. Or on the other hand, if you have an occupant who consistently appears to have a grumbling — be it the boisterous neighbors or the canine who assuages itself on the front grass — you can inhale simply realizing that the property supervisor is the purpose of contact for those kinds of calls.

    Market your rental:

    Property supervisors gift at rental advertising, including composing rental advertisements, taking great photographs, and facilitating open houses. They likewise have nearby land information and will actually want to help you set a serious lease cost. Recruiting a property supervisor with promoting experience can help fill your property sooner and lessen the time it sits empty. If you intend to showcase your property yourself, the property Rental Manager offers an issue-free approach to list your rental on various high-traffic sites.

    Abatement occupant turnover:

    Great property management organizations realize how to keep their tenants cheerful. They are responsive and accessible, and they deal with issues when they emerge. Upbeat leaseholders are additionally more averse to search for somewhere else to live and more willing to acknowledge sensible lease increments. Of occupants who decide to remain in their present rent, half think their house is a decent incentive at the cost and 40% say they love the spot they rent.

    Guarantee lease pay on schedule:

    Since property management organizations deduct their charges from the month-to-month lease, they persuade to keep those installments streaming in. Steady lease assortment is vital to getting rent installments on schedule, and utilizing a property management organization will help authorize rent strategies if installments aren’t gotten. On the off chance that occupants are reliably neglecting to pay their lease on schedule (or by any stretch of the imagination), the property director will realize how to manage the circumstance, including giving an expulsion notice if fundamental. Also, Installment assortment can be a typical issue — the regular leaseholder burns through 29% of their pay on a lease; and, a huge portion of rental families are one huge cost away from being not able to pay.

    Stay away from expected legitimate issues:

    Property directors comprehend landowner occupant laws and reasonable lodging laws. Which can assist you with keeping away from possible claims and save time, cash, and energy over the long haul. Also, They will likewise commonly deal with any legal counselor expenses related to removals or property harm issues. In case you’re not open to taking care of things like expulsions, marking and ending leases, and dealing with lease and security stores. You may require property management organization skills.

    Get a good deal on support and fix costs:

    Utilizing a property management organization may likewise accompany limits for support administrations. If the property directors work with a customary specialist co-op or utilize an in-house upkeep staff. They can perform standard investigations and discover issues before they transform into more pressing issues. Which will decrease the quantity of crisis fix bills.

    Decrease your rental cerebral pains:

    On the off chance that another person is taking care of the everyday management of your investment property and inhabitants. You’ll have fewer entanglements and responsibilities to stress over. On the off chance that additional time and less pressure are vital to your personal satisfaction. Utilizing a property management organization can be an extraordinary resource.

    These are the advantages of property management. Putting resources into an investment property can add to your month to month income and assemble long haul riches. Yet, everyday property management isn’t for everybody. If you simply need extra pay from the lease and don’t have any desire to be answerable for the subtleties of your rental speculation. Consider all the property management benefits that you’ll get for a level of your rental payments.

    What the Functions of a Property Management Company?

    At the point when you have speculation or investment property. Employing a property management organization to deal with your resources is now and again in a way that is better than overseeing everything yourself, also think How to Start the company. Particularly on the off chance that you have more than one property.

    Here are a portion of the duties and capacity of property management organizations:

    Communication or Correspondence:

    The best resource management obligation is correspondence. It is critical to discuss successfully with occupants, proprietors, and providers. Ensure everybody on the same wavelength knows about what should finish.

    Reports:

    It is essential to expect monetary reports consistently. These reports should incorporate any record, the cash got cover bills and different costs. Also, The report ought to incorporate the expense of keeping up the property. For example, cover cleaning, power, yard care, painting, plumbing, and different things, repeating costs. Property chiefs ought to get a definite report that shows all the properties doled out to their consideration.

    Support and Maintenance:

    The property management group gets calls and requests from occupants for fixes and upkeep when required. How to Start the company. These calls can come whenever of day or night, and if the highly sensitive situation requires quick thoughtfulness regarding your property. The management group will actually want to deal with the crisis. Numerous organizations have their support accounts with organizations and business people who perform different kinds of fixes.

    Filling opportunities or vacancies:

    It is the obligation of the management group to keep your property involved by inhabitants, not that property ought to be empty for an extensive stretch. At the point when all units are abandoned, the proprietor loses cash. Property Management Company, having likely, will have an information base of occupants prepared to take off when the current inhabitant moves, How to Start. This data set generally draws because of their promoting endeavors. For example, online advertisements, paper advertisements, and once in a while because of the characters show in a few spots in the area.

    Screening of tenants or occupants:

    At the point when a potential inhabitant is looking for the property. It is the duty of n bequest chief to screen the occupants before leaving the property for them. This may incorporate confirmation, credit check, and individual preferences. Numerous organizations have an estimating scale that decides if the candidate is solid and safe.

    Reviews and Inspections:

    Property chiefs should complete ordinary minds the property to guarantee. That all occupants are attempting to keep the resource great as it was expressed in the arrangement of their rent. The structure should examine by the state establishment, material, plumbing, and cultivating.

    Caution and Warning:

    The management organization will circulate public statements to inhabitants regularly as a bulletin for utilization and advise. Them, about the exercises regarding the local area, significant issues, and critical issues that need consideration.

    How to Become a Property Manager and what does a do they?

    How Does A Property Manager Respond? The expense of property the executives is a substantial contention, particularly when you consider reducing your main concern. Yet, I can guarantee you it’s busy yet. How to become a Product Manager and what does a do they? Truly, a property the board organization will be sure cost extra cash to employ. Yet, I like to consider it a venture, rather than an expense. A decent property manager can without much of a stretch return more than their own underlying expense. All things considered, the normal property the board organization will ordinarily grant financial backers with the accompanying:

    • Collect rent from tenants and gather lease from inhabitants.
    • Listen to maintenance requests and address the problem or tune in to upkeep demands and address the issue.
    • Property managers can manage to default occupants that are a very long time behind in lease. Also market a subject property to limit vacancies.
    • Property managers will showcase a subject property to restrict opportunities
    • Managers will keep nitty-gritty records of everything occurring at the property. And also detailed records of everything happening at the property.
    Rent and Lease Collection:

    Gathering rent is perhaps the clearest undertakings of a property manager. On the off chance that that is all property managers did, notwithstanding. It would positively be more earnestly to legitimize recruiting one – particularly with online installment abilities. Obviously, that doesn’t mean gathering rent is simple using any means. On the off chance that the entirety of your occupants are covering their leases forthright and you wouldn’t fret paying an extraordinary law office when things don’t go right. You may hold on to assess the entirety of the administrations. However, most land financial backers are not in that circumstance. Some work in business sectors where it is a fight to bring in the lease each month.

    Normal and Regular Property Maintenance with Support:

    Managing occupant upkeep calls is maybe the greatest driver for land financial backers to enroll the assistance of a property manager. It isn’t just about the support, be that as it may: managing the occupants can regularly be the greatest test. Now and again their necessities aren’t large or costly, however, the circumstance and desperation are. It could impede and reversing pipes toward the end of the week or being secured out in the center of the evening. A ton of these calls can be bothering to a landowner. Yet, on the off chance that they constantly treat that way. Greater issues with tenants and investment property execution make certain to emerge. Quick and responsive client support expect to advance pay properties.

    Property managers will manage these solicitations, easing you from the weight. If it is little, the solicitations might be dealt with inside. Bigger and more unpredictable issues might appoint outside subject matter experts. Modern property financial backers ordinarily have a property the board arrangement that approves the organization to deal with up to a specific dollar measure of fixes without requiring express authorization first. This simply smoothes out the interaction and guarantees issues don’t deteriorate if you can’t be reached.

  • Economic reforms: Meaning, Definition, Need, and Achievements

    Economic reforms: Meaning, Definition, Need, and Achievements

    Economic reforms in India – Introduction; The performance of the Indian economy within the last decade has been remarkable. Business environment easy – This can partly attribute to the continued economic reforms. Since 1991, the govt of India has introduced diverse economic reforms to tug the country out of the depression and to accelerate the speed of growth. Also, The reforms have embraced almost all aspects of the country’s economy.

    Economic reforms: Introduction, Meaning, Definition, Importance, Need, and Achievements

    Policies concerning industrial licensing, trade and foreign investment have undergone major changes. Also, significant macroeconomic adjustments have taken place. Economic institutions too have undergone a significant change; the banking sector and capital markets, in particular, have been major targets of the change. And finally, structural adjustments covering areas like subsidies, the price Mechanism, and the public sector have also taken place. Collectively, these reforms aim at the modernization of the country’s industrial system, removal of unproductive controls, strengthening of private investment, including foreign investment, and integration of India’s economy with the global economy.

    In one word, it can be said that the all-around opening up of the country’s economy has been the essence of the reforms. All these economic reforms knowing as the new Economic Policy. Accordingly, New Economic Policy refers to all those different economic reforms introduced since July 1991 or policy measures and changes that aim at increasing productivity and efficiency by creating an environment of competition in the economy.

    Meaning and Definition of economic reforms:

    Economic reforms or new policy refers to varied policy measures and changes introduced since 1991. The common objective of all these measures is to improve the productivity and efficiency of the economy by creating a more competitive environment therein.

    The reforms are often classified into two broad categories:

    Changes in the sphere of industrial licensing policy and foreign trade as well as foreign investment policies belong to the first category. Also, Reforms touching the macroeconomy and economic institutions plus structural adjustments covering areas like subsidies, price environment, and public sector, belong to the second category. All these initiatives collectively mention because of the New Economic Policies (NEP).

    Importance and Need for Economic Reforms or New Economic Policy:

    About five decades back (1st April 1951) India had commenced its journey to economic development on the path of a socialistic pattern of society and mixed economy. So far India has completed 9 five-year plans. There is no denying the fact that in these five decades Indian economy has achieved many successes but the number of failures is by no means small. During the period of planning the public sector was given utmost importance. Also, The private sector was largely kept under government control. Trade and industry were subjected to many restrictions. Bureaucracy and red-tapism were the normal features of the economy. The cumulative effect of all this was that at the end of June 1991, the country landed in an unprecedented economic crisis.

    Stores of unfamiliar trade were only adequate to pay for fourteen day’s imports. New loans were not available. Enormous sums were being removed from the records of non-private Indians (NRIs). The faith of the international community in the Indian economy was shaken. Industrial progress was in reverse gear and prices were skyrocketing. To haul the economy out of monetary emergency and to put it on the way to quick and consistent financial development; it was generally fundamental to address monetary disequilibrium, check expansion, the right unfriendly equilibrium of installments, and recharge trade saves. To achieve all these objectives, the introduction of economic reforms or an appropriate economic policy was considered inevitable.

    The importance and need for economic reforms or the New Economic Policy were felt predominantly in light of the accompanying reasons.

    Increase in Fiscal Deficit:

    Before 1991, the monetary shortfall of the public authority had been mounting quite a long time after year because of the constant expansion in its non-advancement use. Also, Financial A shortage implies the contrast between absolute consumption and all-out receipts with fewer credits. It is equal to add up to borrowings by the public authority. In 1981-82, it was 5.4 percent of total national output (GDP). In 1990-91, it rose to 8.4 percent of GDP.

    To meet the monetary shortfall, the public authority obliges to raise advances and pay interest consequently. Consequently, because of the persevering ascent in the financial shortage, there was a relating ascend in open obligation and interest installment risk. In 1980-81, interest installment on open obligation added up to 10 percent of complete government consumption. In 1991, the measure of interest risk rose further to 36.4 percent of complete government use. There was not kidding anxiety that the public authority was quick-setting out toward an obligation trap.

    Increase in Adverse Balance of Payments:

    The equilibrium of an installment is the distinction between absolute fares and all-out imports of a nation. Exactly when outright imports outperform full-scale tolls, the harmony of portions gets threatening. Also, The public authority conceded assorted sorts of motivating forces and concessions to the exporters under the fare advancement program, yet the fare didn’t ascend to the ideal degree. It was fundamentally because in the global market our fares couldn’t contend in cost and quality.

    This was the immediate consequence of the arrangement of assurance so generously sought after by the public authority and for such a long time. As against the moderate development of fares, there was a quick expansion in imports. Subsequently, the equilibrium of installments shortfall expanded without question. The shortage of the equilibrium of installments had been rising consistently since 1980-81. For example, in 1980-81, the equilibrium of installments on the current record was unfavorable to the tune of Rupees 2,214 crore and it rose in 1990-91 to Rupees 17,367 crore. To meet this insufficiency a tremendous proportion of new credits should obtain.

    Gulf Crisis:

    Under the Iraq war in1990-91, costs of petroleum shot up. India used to get a colossal measure of settlements from Gulf nations in unfamiliar trade all that halted completely. Inlet emergency consequently further complimented as of now an antagonistic equilibrium of installments position. This has expanded the equilibrium of installments shortfall definitely.

    Fall in Foreign Exchange Reserves:

    In 1990-91 India’s new exchange saves tumble to a specific level that the identical was adequately not to cover for an import tab for even 10 days. Unfamiliar trade saves that were Rupees 8,151 crore in 1986-87 declined pointedly to Rupees 6,252 crore in 1989-90. The circumstance developed so intense that the Chandrashekhar government needed to contract the nation’s gold to release its unfamiliar obligation overhauling commitment.

    Ascend in expenses:

    In India, costs continued rising high. The normal yearly pace of expansion expanded from 6.7 percent to 16.7 percent. The fundamental explanation behind expansion or a yearly pace of expansion in costs was a quick expansion in the stockpile of cash. This, thusly, was because of the over top hotel to the shortage of financing by the public authority. Shortage financing infers getting from the Reserve Bank of India by the public authority to meet its shortfall. Bank offered this development by printing new money notes. The expense of creation takes an upward bounce because of the high pace of expansion. It unfairly impacts local and new interest in our things.

    Lackluster appearing of Public Sector Undertakings (PSU):

    In 1951 there were just 5 undertakings in the public region in India anyway in 2001 their number rose to 232. Two or three thousand crores of public resources were added to that. In the underlying 15 years, their working was very agreeable yet from that point the majority of these endured misfortunes. As a result of their terrible showing. Public area endeavors deteriorated into a risk.

    Because of the above convincing elements, it got inescapable for the public authority to embrace the New Economic Policy. It was even more important to increment mechanical yield and pull in unfamiliar capital.

    Some Basic and Advanced Achievements of Economic Reforms:

    The second economic reforms were reported in July 1991; there was an inclination that the public authority was slackening a portion of the controls. The troubles and postponements related to the previous arrangement of controls were currently expected to evaporate. Fourth biggest economy (US dollar 3 trillion GDP) as far as Purchasing Power Parity after the USA, China, and Japan. The basics of the Indian economy have got solid and stable.

    The large scale economic pointers are at present the best throughout the entire existence of autonomous India with high development, solid unfamiliar trade holds, and unfamiliar venture and powerful increment the basics of the Indian economy have gotten solid and stable. The full-scale economic markers are at present the best in the historical backdrop of autonomous India with high development, sound unfamiliar trade saves, and unfamiliar speculation and hearty expansion in fares, and low swelling and financing costs.

    Likewise, a portion of the significant achievements of economic reforms can summarize as follows:

    First achievements
    • The growth pace of the economy regarding GDP development got and arrived at a pinnacle pace of 8.4 percent in 2002-03. A novel element of the progress of the Indian economy is that it has become the second-quickest developing economy of the world in the year 2003 – 04. In the monetary year 2004 – 05, the GDP development has arrived at the midpoint of 6.9% (assessed). India has recorded one of the most noteworthy development rates during the 1990s. The objective of the tenth five-year Plan (2002-07) is an 8% development rate.
    • India’s administration area developed by 9.4% in 2004-05. Unfamiliar direct speculations have expanded from under 0.05 percent of GDP to more than 0.4 over a penny of GDP in 2002-03.
    • The unfamiliar trade holds have arrived at a record level of US dollar 138.84 billion in June 2005. Also, The agreeable circumstance of forex holds has encouraged further unwinding of unfamiliar trade limitations and a continuous move towards more prominent capital record convertibility. As per the IMF (2003 report), India’s Forex Policies by worldwide prescribe procedures.
    Second achievements
    • The unfamiliar trade save has expanded quickly. In 1990-91, the unfamiliar trade saves were sufficient to back imports for 2.5 months. In 2002-03, they are sufficient to back imports for 11 months. Unfamiliar Exchange Reserves (US dollar 138.84 billion) presently far surpass Foreign Debt (US dollar 113 billion as of September 2004).
    • The short-term obligation is under 4 percent of the stores. In March 1991 Forex Reserves including gold remained at dollar 5.8 billion as against the outer obligation of dollar 83 billion. The outer obligation to GDP proportion has improved altogether from 38.7% in 1992 to 17.8% at end of March 2004. This is one of the least among creating economies. The outer obligation in December 2004 was 120.9 billion US dollars. Of these drawn-out NRI, stores are dollar27 billion, business borrowings dollar24 billion, multilateral obligation dollar 31 billion, and respective obligation dollar 18 billion.
    Third achievements:
    • The pace of modern development likewise began ascending from 1993-94 onwards. It arrived at a pinnacle pace of 6.7 percent in 2002-03.
    • The average pace of expansion has been decreased extensively, from almost 13.6 percent in 1991-92 to around 3.4 percent in 2002-03.
    • The Government has chosen to (1) cease getting help from different nations aside from the accompanying nine: Japan, UK, Germany, USA, EU, France, Italy, Canada, and the Russian Federation and (2) to make pre-installment of all respective obligation owed to all the countries aside from the ones referenced previously. Since July 2003, India has become a net leaser to IMF, in the wake of having been a borrower before.
    • The Government has discounted obligations of US$ 30 million due from seven intensely obliged nations as a component of the “India Development Initiative” reported in February 2003. Also, The loan cost keeps on being decreased and is around 6%. This is the most minimal over the most recent thirty years and it is animating utilization and speculation.
    Forth achievements
    • Thanks to the presentation of screen-based exchanging and electronic conveyance, the financial exchange has been genuinely changed. Their joined impact has been to lessen the exchange costs in India’s securities exchange drastically.
    • India is turning into a creation base and a fare center point for assorted merchandise, from horticultural items to vehicle segments to top of the line administrations. Indian firms are presently essential for worldwide creation chains — bringing in sub-gatherings, enhancing them, and re-sending out them.
    • Taking the favorable position of its pool of top-notch logical ability, global enterprises have set up enormous R&D focuses in India. Every one of these qualities has brought about the more noteworthy joining of the Indian economy with the world economy. The exchange has ascended from 21 percent to 33 percent of India’s GDP in 10 years.
    Economic reforms Introduction Meaning Definition Importance Need and Achievements Image
    Economic reforms: Introduction, Meaning, Definition, Importance, Need, and Achievements; Image from Pixabay.
  • Corporate Governance (CG): Meaning, Definition, Principles, and Need

    Corporate Governance (CG): Meaning, Definition, Principles, and Need

    What does mean Corporate Governance (CG)? Corporate governance as a subject, along with its models, has been in existence since the time businesses came into being. It is a set of rules and regulations according to which the behavior of a company is affected. This explains the article of Corporate Governance (CG) and their concept, Meaning, Definition, Need, and Principles. By Wikipedia, Corporate governance is the collection of mechanisms, processes, and relations by which corporations control and operate. Often it views as a statutory requirement guided through the regulatory body that concern with company affairs.

    Here are read and learn; Corporate Governance (CG): Meaning, Definition, Principles, and Need.

    Corporate governance (CG) sees, until recently, as limited to listed companies that needed to comply with disclosure norms to protect investor rights, especially those of minority shareholders. As long as management and investors were balancing the affairs of the business in a congenial atmosphere, there was no special attention being diverted to this subject.

    Another aspect of it is that it also concern with the relationships which exist among different stakeholders of the company and with the goals which the company has in view. Also, Shareholders, the board of directors, employees, customers, creditors, suppliers, and the community at large are the main stakeholders of a business.

    Gabrielle O’Donovan defines corporate governance as an internal system encompassing policies, processes, and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business know-how, objectivity, accountability, and integrity. Sound CG is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes.

    Definition of Corporate Governance (CG):

    Corporate governance is a collective term encompassing various issues concerning top management, the board of directors, shareholders and the corporate stakeholders. The following definition of corporate governance below are;

    “A system by which business corporations direct and control. Corporate governance structures specify the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company’s objectives are set and the means of attaining those objectives and monitoring performance.”

    Report of SEBI committee (India) on Corporate Governance defines corporate governance as;

    “The acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and their role as trustees on behalf of the shareholders. It is about commitment to values, about ethical business conduct and about making a distinction between personal & corporate funds in the management of a company.”

    CG has several areas of discussion such as the effect of a system of corporate governance in economic efficiency whereby more emphasis has to be put on shareholder’s welfare.

    Principles of Corporate Governance (CG):

    Several principles underpin effective corporate governance. Honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization forms an essential part of CG. Also, the most important part of corporate governance is to see whether the management has been able to develop a model that is in line with the standards of the corporate participants.

    In addition to this, they must evaluate this model from time to time to ensure that it is effective. Hence the management should do their work honestly and ethically, particularly concerning conflicts of interest and disclosure in financial reports.

    Commonly accepted principles of corporate governance include:

    1] Disclosure and transparency Principles:

    Transparency means the quality of something which enables one to understand the truth easily. In the context of CG, it implies an accurate, adequate and timely disclosure of relevant information about the operating results, etc. of the corporate enterprise to the stakeholders. Also, Transparency is the foundation of corporate governance; which helps to develop a high level of public confidence in the corporate sector.

    For ensuring transparency in corporate administration, a company should publish relevant information about corporate affairs in leading newspapers, e.g., on a quarterly or half-yearly or annual basis. As well as, Organizations should simplify and make publicly known the roles and responsibilities of board; and, management to provide shareholders with a level of accountability.

    They should also implement measures to independently validate and safeguard the integrity of the company’s financial reporting. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual information.

    2] Accountability Principles:

    Accountability is a liability to explain the results of one’s decisions taken in the interest of others. In the context of CG, accountability implies the responsibility of the Chairman, the Board of Directors and the chief executive for the use of the company’s resources (over which they have authority) in the best interest of the company and its stakeholders.

    3] Independence Principles:

    Good corporate governance requires independence on the part of the top management of the corporation i.e. the Board of Directors must be strong non-partisan body; so that it can take all corporate decisions based on business prudence. Without the top management of the company being independent; good CG is only a mere dream.

    4] In other words:

    The following are;

    • Rights and equitable treatment of shareholders: the company should respect the rights of shareholders; and, help shareholders to implement those rights. They can help shareholders exercise their rights by effectively communicating understandable information; and, accessible and encouraging shareholders to participate in general meetings.
    • Interests of other stakeholders: Organizations should be aware of the legal and other obligations that all legitimate stakeholders have.
    • Integrity and ethical behavior: Ethical and responsible decision making is not only important for public relations; but, it is also a crucial part of risk management and avoiding lawsuits. businesses should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making. It is important to understand, though, that reliance by a company on the integrity and ethics of individuals is bound to eventual failure. Because of this, many organizations establish Compliance and Ethics Programs to minimize the risk that the firm steps outside of ethical and legal boundaries.
    • Role and responsibilities of the board: The board needs a variety of skills and understanding to be able to deal with various business issues and have the aptitude to review and challenge management performance. It needs to be of adequate size and have an apt level of commitment to fulfill its responsibilities and duties. There are issues about the appropriate mix of executive and non-executive directors.

    Need for Corporate Governance (CG):

    As a result of globalization and the increasing complexity of the business; there is a greater reliance on the private sector as the engine of growth in developed and developing countries. Organizations do not exist in a vacuum; they rather interrelate with several interest groups, known as stakeholders.

    These stakeholders include shareholders, governments, regulatory bodies, creditors and the general public. Also, Stakeholders are impacted by the activities of companies. In this regard, and the context of this study, adequate and effective corporate governance disclosure becomes relevant to investors and other stakeholders from several standpoints.

    The need for corporate governance highlight by the following factors:

    1] Wide Spread of Shareholders:

    Today a company has a very large number of shareholders spread all over the nation and even the world; and, a majority of shareholders being unorganized and having an indifferent attitude towards corporate affairs. The idea of shareholders’ democracy remains confined only to the law and the Articles of Association; which requires a practical implementation through a code of conduct of CG.

    2] Changing Ownership Structure:

    The pattern of corporate ownership has changed considerably, in the present-day-times; with institutional investors (foreign as well Indian) and mutual funds becoming the largest shareholders in large corporate private sectors. These investors have become the greatest challenge to corporate management; forcing the latter to abide by some established code of corporate governance to build up its image in society.

    3] Corporate Scams or Scandals:

    Corporate scams (or frauds) in the recent years of the past have shaken public confidence in corporate management. The event of the Satyam Scam or scandal, Harshad Mehta scandal; which is perhaps, one biggest scandal, is in the heart and mind of all, connected with corporate shareholding or otherwise being educated and socially conscious. The need for CG is, then, imperative for reviving investor’s confidence in the corporate sector towards the economic development of society.

    4] Greater Expectations of Society of the Corporate Sector:

    Society of today holds greater expectations of the corporate sector in terms of reasonable price, better quality, pollution control, the best utilization of resources, etc. To meet social expectations, there is a need for a code of CG; for the best management of the company in economic and social terms.

    5] Hostile Take-Overs:

    Hostile takeovers of corporations witnessed in several countries put a question mark on the efficiency of the management of take-over companies. These factors also point out the need for corporate governance, in the form of an efficient code of conduct for corporate management.

    6] Huge Increase in Top Management Compensation:

    It has been observed in both developing and developed economies that; there have been a great increase in the monetary payments (compensation) packages of top-level corporate executives. There is no justification for exorbitant payments to top-ranking managers, out of corporate funds; which are property of shareholders and society. This factor necessitates CG to contain the ill-practices of top management of companies.

    7] Globalization:

    The desire for more and more Indian companies to get listed on international stock exchanges also focuses on a need for CG. Also, CG has become a buzzword in the corporate sector. There is no doubt that the international capital market recognizes only companies well-managed according to standard codes of corporate governance.

    Corporate Governance (CG) Meaning Definition Principles and Need Image
    Corporate Governance (CG): Meaning, Definition, Principles, and Need, Image from Pixabay.

    So, this oversight and accountability combined with the efficient use of resources improved access to lower-cost capital; and, increased responsiveness to societal needs and expectations leads to improved corporate performance. As well as, Good corporate governance helps to bridge the gap between the interests of those that a company, by increasing investor confidence and lowering the cost of capital for the company.

    Furthermore, it also helps in ensuring company honors, its legal commitments, and forms value-creating relations with stakeholders. Companies with better corporate governance enjoy a higher valuation. Good corporate governance, resulting in better decisions at all levels of the organization, not at top-management and board levels; but, also in the better performance of the organization.

    Reference:

    • en.wikipedia.org/wiki/Corporate_governance
    • www.yourarticlelibrary.com/corporate-governance/what-is-corporate-governance/99690
    • www.mbaknol.com/business-ethics/corporate-governance-concept-need-and-principles/
    • www.yourarticlelibrary.com/business/corporate-governance-business/corporate-governance-in-india-concept-needs-and-principles/69978
  • Forensic Accounting: Definition, Concept, Need, and Practice

    Forensic Accounting: Definition, Concept, Need, and Practice

    What is Forensic Accounting? The application of accounting skills to provide quantitative financial information about matters before the courts. This article explains to Forensic Accounting definition along with their practice and also need to know about by concept. The series of accounting scandals in the early years of the 21st century led to profound changes and transition in the accounting profession, laws, and regulations. Among these developments was the emergence of forensic accounting.

    Forensic Accounting: Definition, Concept, Need, Practice, Role, and significance.

    Forensic accounting frequently uses on construction claims, financial contract disputes, environmental claims, government contract claims, and fraud investigations, among others. Professionals involved in this field are often engaged in examination and evaluation of financial evidence; the advancement and improvement of computer applications; that will aid and support the forensic accountants in analyzing and presenting financial evidence; providing services and support in legal proceedings. Also, Forensic accounting is the study of financial fraud and misconduct.

    The Association of Certified Fraud Examiners described financial accounting as;

    “A set of skills used in potential or actual civil or criminal cases, including generally accepted accounting and auditing ones; determining loss of profits, revenues, property, or damage; and assessment of internal controls, fraud, and everything else that leads to the applying of accounting knowledge to the legal system.”

    As well as, Forensic accounting is an integration of auditing, accounting, and investigative skills, and presents an accounting evaluation; that is appropriate and acceptable to the court; which will then establish the basis for discourse, debate, and the settlement of arguments.

    Definition of Forensic Accounting:

    The definition of forensic accounting is changing in response to the growing needs of corporations.

    Bologna and Lindquist had defined forensic accounting as;

    “The application of financial skills, and an investigative mentality to unresolved issues, conducted within the context of rules of evidence. As an emerging discipline, it encompasses financial expertise, fraud knowledge, and a sound knowledge and understanding of business reality and the working of the legal system.”

    According to AICPA as;

    “Forensic accounting is the application of accounting principles, theories, and discipline to facts or hypotheses at issues in a legal dispute and encompasses every branch of accounting knowledge.”

    Forensic accounting defines by Zia as,

    “The science that deals with the relation and application of finance, accounting, tax, and auditing knowledge to analyze, investigate, inquire, test and examine matters in civil law, criminal law, and jurisprudence in an attempt to obtain the truth from which to render an expert opinion.”

    Concept of Forensic Accounting:

    After definition, the principle point of forensic accounting [Are from, for a support article] is not just to see how extortion was submitted, however, to report it with the most astounding conceivable precision. As indicated by Gomide, a great Forensic accounting consolidates accounting examination furthermore requires great accounting and investigative aptitudes.

    In the talk, EFG refers to that;

    “It falls under general data or certain points, or subjects as it can sort general articulations that individuals make to portray the subject, as investigative accounting or even Forensic auditing”.

    Forensic accounting can characterize as help with a question in regards to assertions or suspicion of extortion; which are liable to include case, master assurance, and inquiry by a fitting power, and examinations of suspected misrepresentation, abnormality or indecency which could prompt common, criminal or disciplinary procedures.

    The emphasis is basically on accounting issues; however, the part of the forensic bookkeeper may stretch out to more broad examination which incorporates proof social affairs. It is a result of the way that by definition, forensic assignments are identified with a legal or semi-legal debate determination; that the Forensic specialist requires a fundamental comprehension of the material statutory and customary law, the law of confirmation and the law of methodology.

    The most skilfully led examination will be of no quality to the customer ought to the confirmation accumulated rule to forbid or the master accounting witness find to miss the mark in appreciation of the necessities of ability, believability, or autonomy.

    Why need to know about Forensic accounting? or Need for Forensic accounting.

    Forensic accounting identifies with the use of accounting ideas and systems to lawful issues. Measurable accountants for the most part research and archive money related extortion and cushy wrongdoings. The result of the measurable examination, including appraisals of misfortunes, harms, and resources would utilize as prosecution backing to lawyers and law requirement staff.

    They offer imperative help for legitimate cases in numerous regions of the law; for example, securities exchange controls, value altering plans, item risk, shareholder debate, and breaks of agreement. Forensic accounting, forensic auditing or financial forensics is the forte practice range of accounting that depicts engagements; that outcome from genuine or expected debate or suit.

    First Things:

    “Forensic” signifies “appropriate for use in a courtroom”, and it is to that standard and a potential result that legal accountants, for the most part, need to work. These accountants, additionally alluded to as Forensic examiners or investigative evaluators, frequently need to give master proof at the inevitable trial. Crumbley, D. Larry; Heitger, Lester E.; Smith, G. Stevenson (2005) All of the bigger accounting firms, and also numerous medium-sized and boutique firms, and different Police and Government organizations have pro Forensic accounting divisions.

    Inside these gatherings, there might be further sub-specializations: some forensic accountants may, for instance, simply represent considerable authority in protection claims, individual harm claims, extortion, development. Cicchella, Denise (2005). Alternately sovereignty reviews. Parr, Russell L.; Smith, Gordon V. (2010).

    Second Things:

    “While Forensic Accountants (“FAs”) typically don’t give assessments, the work performed and reports issued will frequently give answers to the how, where, what, why and who. The FAs have and are keeping on advancing as far as using innovation to help with engagements to distinguish oddities and irregularities. Remember that it is not the Forensic Accountants that decide misrepresentation, but rather the court.” Bhasin Madan(2007).

    Also, Forensic accountants have been depicting as experience evaluators, accountants, and specialists of legitimate and money related reports that are employed to investigate conceivable suspicions of false movement inside an organization; or are procured by an organization that may simply need to keep deceitful exercises from happening. They likewise give administrations in zones, for example, accounting, antitrust, harms, investigation, valuation, and general counseling.

    Third Things:

    Forensic accountants have likewise been utilized as a part of separations, protection claims, individual damage claims, fake cases, development, sovereignty reviews, and following psychological warfare by exploring monetary records. Numerous forensic accountants work intimately with law requirement faculty and legal counselors amid examinations and frequently show up as master observers amid trials.

    It is an amalgam of forensic science and accounting. Even though the instituting of the term Forensic Accounting says to go back to 1946, the practice is moderately new in Nigeria. Hopewood, A.G.(2009). The requirement for a forensic accountant has been attributed to the way that the review framework in an association has neglect to recognize certain mistakes in the administrative framework.

    Forth Things:

    Forensic Accounting is examination accounting which includes breaking down, testing, asking and looking at the common and criminal matters lastly giving an impartial and genuine report. Pretty much as forensic examinations and lab reports are requires in the court to understand the homicide and dacoit puzzles; correspondingly forensic accounting assumes a key part in following the financial fraud and clerical wrongdoings.

    Be that as it may, forensic accounting covers an extensive variety of operations of which misrepresentation examination is a little part where it is generally predominant. There are two noteworthy angles inside legal accounting hone; prosecution benefits that perceive the part of a Chartered Accountant as a specialist or expert and investigative administrations that make utilization of the Chartered Accountant’s abilities, which could prompt court declaration.

    The practice of Forensic Accounting:

    Arnoff, Norman B., and Sue C. Jacobs. (2001) had clarified the administrations rendered by the forensic accountants are in incredible interest in the accompanying territories;

    Fraud detection where employees commit Fraud:

    Where the employee enjoys fake exercises; Where the representatives are gotten to have submitted misrepresentation the forensic accountant tries to find any benefits made by them out of the assets defalcated; then take a stab at questioning them and attempting to discover the concealed truth.

    Criminal Investigation: 

    Matters identifying with money related ramifications the administrations of the forensic accountants are benefited of. The report of the accountants considers getting ready and present as proof.

    Outgoing Partner’s settlement:

    If the active accomplice is not upbeat about his settlement he can utilize a forensic accountant; who will accurately evaluate his contribution (resources) and also his liabilities effectively.

    Cases relating to professional negligence:

    Proficient carelessness cases are taken up by the forensic accountants. Non-adaptation to Generally Accepted Accounting Principles (GAAP) or rebelliousness to examining hones or moral codes of any calls; they are expected to gauge the misfortune because of such expert carelessness or deficiency in administrations.

    Arbitration service:

    Forensic accountants render assertion and intercession administrations for the business group since they experience extraordinary preparing in the region of option question determination.

    Facilitating settlement regarding the motor vehicle accident:

    As the forensic accountant is very much familiar with the complexities of laws identifying with engine vehicles; and, other applicable laws in power, his administrations get to be vital in measuring monetary misfortune when a vehicle meets with a mishap.

    Settlement of insurance claims:

    Insurance agencies connect with forensic accountants to have a precise evaluation of cases to settle. Also, policyholders look for the assistance of a legal accountant; when they have to challenge the case settlement as worked out by the insurance agencies. A legal accountant handles the cases identifying with significant misfortune arrangement, property misfortune; because of different dangers, devotion protection and different sorts of protection cases.

    Dispute settlement:

    Business firms connect with legal accountants to handle contract debate, development claims, item risk cases, and encroachment of patent and trademarks cases; obligation emerging from the break of agreements et cetera.

    Matrimonial dispute cases:

    Forensic accountants engage cases relating to matrimonial disputes wherein their part simply restricts to following, finding and assessing any type of advantage included.

    Aside from learning of accounting, law, and criminology, a forensic accountant likewise should acquaint with corporate financial management and administration. He additionally needs PC aptitudes, great correspondence and meeting abilities.

    Forensic Accounting Definition Concept Need and Practice
    Forensic Accounting: Definition, Concept, Need, and Practice. Coin Money Business #Pixabay.

    Role and significances of Forensic Accounting and fraud examiner [Are from, for a support article]:

    Forensic accounting is a legal term. It is in its simplest form application of accounting techniques and concepts in issues concerning legal matters. The requirement comes due to the high rate of white-collar crimes like embezzlement, fraudulent financials, and various other financial wrongdoings.

    As well as, Forensic Accountant calls upon to investigate various financial frauds by the employees, clients, Customers either independently; or in collusion one another and misappropriating the assets of the company.

    Forensic Accountants also help the Government in the enforcement of regulatory requirements. Many bank fraud is common with the collusion of the borrower and bank staff etc.; where the expertise of the Forensic Accountant comes in unfolding the fraud and helping the corporates nail the fraudsters.

    Also, Forensic Accountants help needs in price fixations, stock market manipulations and at times even manipulation of the financial figures by the managements to window dress; the balance sheet and profit and loss account figures to hide real facts from the stakeholders and general public; for the funds misused or misappropriated by the top management.

  • Organisational Behaviour: Elements, Nature, and Importance

    Organisational Behaviour: Elements, Nature, and Importance

    Organisational behaviour is generally confused with organisational theory, organisational psychology, and human resource management. This article also explains their Elements, Nature, and Importance. Organisational psychology restricts itself to psychological factors only whereas organizational behavior considers and combines all the branches of study e.g. Science, technology, economics, anthropology, psychology, and so on.

    Organisational Behaviour: Elements, Nature, Need, and Importance.

    It is the basis of human resource management and development. The former is concept-oriented whereas the latter is concerned with the technology of human development. The variables influencing human development are scientifically studied under organisational behaviour.

    Elements of Organisational Behaviour:

    The key elements in organisational behaviour are people, structure, technology, and the environment in which the organization operates.

    1. People: People make up the internal and social systems of the organization. They consist of individuals and groups. Groups are dynamic and they work in the organization to achieve their objectives.
    2. Structure: Structure defines the formal relationships of the people in organizations.
    3. Technology: Technology such as machines and work processes provide the resources with which people work and affect the tasks that they perform.
    4. Environment: All organizations operate within an external environment.

    Nature of Organisational Behaviour:

    Organisational behaviour in the study of human behavior in organizations. Whenever an individual joins an organization he brings with him a unique set of personal characteristics, experiences from other organizations, and a personal background.

    • At the first stage, organizational behavior must look at the unique perspective that each individual brings to the work setting.
    • In the second stage, organizational behavior is to study the dynamics of how incoming individuals interact with the broader organization. No individual can work in isolation.

    He comes into contact with other individuals and the organization in a variety of ways. The individual who joins a new organization has to come into contact with the co-workers, managers, formal policies and procedures of the organization, etc.

    Each individual brings to an organization a unique set of personal characteristics, experiences from other organizations, the environment surrounding the organization and they also possess a personal background. In considering the people working in an organization, organizational behavior must look at the unique perspective that each individual brings to the work setting. But individuals do not work in isolation.

    They come in contact with other individuals and the organization in a variety of ways. Points of contact include managers, co-workers, formal policies and procedures of the organization, and various changes implemented by the organization. Over time, the individual, too, changes, as a function of both the personal experiences and the organization. The organization is also affected by the presence and eventual absence of the individual.

    The study of organisational behaviour must consider how the individual and the organization interact. An organization, characteristically, exists before a particular person joins it and continues to exist after he leaves it. Thus, the organization itself represents a crucial third perspective from which to view organizational behavior.

    Why Need for studying Organisational Behaviour?

    The rules of work are different from the rules of play. The uniqueness of rules and the environment of organizations forces managers to study organisational behaviour to learn about normal and abnormal ranges of behavior.

    Organizational behavior is essentially an interdisciplinary approach to study human behavior at work. It tries to integrate the relevant knowledge drawn from related disciplines like psychology, sociology, and anthropology to make them applicable for studying and analyzing organizational behavior.

    Purposes of Organisational Behaviour:

    More specifically, organisational behaviour serves three purposes:

    1. What causes behaviour?
    2. Why particular antecedents cause behaviour?
    3. Which antecedents of behaviour can be controlled directly and which are beyond the control?

    A more specific and formal course in organizational behavior helps an individual to develop more refined and workable sets of the assumption that is directly relevant to his work interactions. Organizational behavior helps in predicting human behavior in the organizational setting by drawing a clear distinction between individual behavior and group behavior.

    They do not provide solutions to all complex and different behavior puzzles of organizations. It is only the intelligent judgment of the manager in dealing with a specific issue that can try to solve the problem.

    They only assist in making judgments that are derived from tenable assumptions; a judgment that takes into account the important variables underlying the situation; the judgment that is assigned due recognition to the complexity of individual or group behavior; the judgment that explicitly takes into account the managers own goals, motives, hang-ups, blind spots, and weaknesses.

    Organisational Behaviour Elements Nature and Importance
    Organisational Behaviour; Elements, Nature, and Importance, #Pixabay.

    Importance of Organisational Behaviour:

    Organisational behaviour is the analysis of an organization’s structure, func­tions, and the behavior of its people. The behavioral study encompasses both groups as well as individuals. It is an interdisciplinary field and has its roots in sociology and psychology. Organizational behavior is based on sociol­ogy, as the word organization itself represents social collectivity. It is linked to psychology because the subject encompasses the study of people, individu­ally and in groups at the workplace (essentially, an organization).

    Individual and group behaviour is again the function of many factors, which extend to other interdisciplinary fields such as economics, political science, social an­thropology, engineering, and human resource management. The scope of organizational behavior is therefore extensive. An organization needs to manage all these aspects so that it can sustain itself in a competitive market.

    Some importance of OB:

    The following basic importance is below;

    • It builds a better relationship by achieving people’s, organizational, and social objectives.
    • It covers a wide array of human resources like behavior, training and development, change management, leadership, teams, etc.
    • They bring coordination which is the essence of management.
    • It improves the goodwill of the organization.
    • It helps to achieve objectives quickly.
    • They make optimum utilization of resources.
    • It facilitates motivation.
    • It leads to higher efficiency.
    • They improve relations in the organization.
    • It is multidisciplinary, in the sense that it applies different techniques, methods, and theories to evaluate the performances.

    Theoretically, it is difficult for us to draw a line between management and organizational behavior. It can say that one supplements the other. Some organizational behavior issues have their roots in management processes. The study of management began much before the study of organiza­tional behavior. Studies in organizational behavior started in the middle of the twentieth century.

    Organizational behavior studies, therefore, draw from management theories to understand aspects such as organizational structure, the behavior of people in an organization, and the issues concerning external and internal fit. Successful management of organizational behavior largely depends on the management practices that prevail in an organization. Understanding organizational behavior, therefore, requires a clear understanding of the basics of management.

  • Need and Benefits of Competitive Intelligence with Objectives and difference

    Need and Benefits of Competitive Intelligence with Objectives and difference

    What does Competitive Intelligence (CI) mean? Benefits of Competitive Intelligence; Competitive intelligence (CI) is the action of defining, gathering, analyzing, and distributing intelligence about products, customers, competitors, and any aspect of the environment needed to support executives and managers in strategic decision making for an organization. Need and Benefits of Competitive Intelligence with Objectives and difference. The growing competition in the business industry has made it necessary for any company to stay in competition or have a competitive advantage over its competitors, adequate and relevant information about the competitors need to receive or know at the right time in other to make a good strategic business decision.

    Know and Understand the Explanation of Competitive Intelligence.

    Definition by business Jargon’s: In business parlance, competitive intelligence can understand as the process of identifying, gathering, evaluating and disseminating, information concerning competitor’s strengths and weaknesses, products, and customers, which a firm requires for strategic decision making. In other words, it is a legal and ethical practice that helps in improving the firm’s competitive ability and capacity.

    Discussion of the topic “Competitive Intelligence” first Meaning of Competitive Intelligence, Definition, Why need be Competitive Intelligence? then Benefits. We can also discuss the Objectives with the Difference between Competitive Intelligence and Market Intelligence.

    Competitive intelligence or otherwise called as early signal analysis encompasses information relating to competitor’s plans, products, next moves, and actions. Such intelligence influences the organization’s plans and strategies. Add to that, it helps in prior ascertainment of opportunities and threats in the marketplace, before they are apparent.

    Competitive intelligence [Hindi] defines as a systematic process that transforms random bits and pieces of data into strategic knowledge. This information comprises about competitors, customers, technological, environmental, product, and market in. others to make a good strategic decision.

    Competitive intelligence is described as those activities a company undertake in determining; and, understanding its industry as well as identifying and understanding the competitors, also determine and understand their weaknesses and strength and anticipate their next moves.

    This definition of competitive intelligence tends to identify/determine, understand, and anticipate industry and competitors. Furthermore, competitive intelligence is a process of monitoring the competitive environment, to provide actionable intelligence that will enhance a company’s competitive advantage over its competitors.

    Why need be Competitive Intelligence?

    In today’s changing business environment, organizations need to implement competitive intelligence because:

    Business activity is increasing rapidly:

    If customers expect businesses to deliver goods as quickly as possible as well as communicate with them with a faster means of communication. To meet these requirements organizations need efficient management and CI.

    Needed Business Information overload:

    Organizations are privileged to collect a lot of information, but organizations do not have the idea of which information is relevant. Competitive intelligence will assist in analyzing the collected information, filter it, learn what is relevant, and use it to benefit various business decisions and strategies.

    Global competition Increase by new competitors:

    Companies are now moving across their original borders into another country. For example, financial firms like HSBC can be found in several countries in which they constitute a threat and complete with the home companies.

    The existing competitor is becoming more aggressive:

    Competitive intelligence will help organizations forecast competitor’s actions and allow organizations to be proactive because all companies want to acquire more market share and customers.

    Political changes affect anybody quickly and forcefully:

    Deregulation of business such as retail, insurance, and aviation industry create more threat to organizations in other sectors because their sector can also be deregulated; but implementing CI the organizations will keep informed about the proposed political change that might affect the business.

    Technology is going to change by Rapidly:

    As organizations can all observe that technology is changing rapidly to the extent that something new happens in the computer industry like breakthroughs which tend to create new opportunities.

    For example, the iPhone held the highest market share as well as the highest customers but when the Samsung Android and Redmi came into the picture and video, iPhone’s market share and customer base starts to decline. However, if organizations implement competitive intelligence, it will keep track of technological changes in the industry and other industry that is important to an organizations survival.

    Important Benefits of Competitive Intelligence:

    A formal Benefits of competitive intelligence program can do the following;

    Change in the marketplace:

    Companies that observe the marketplace tend not to caught unawares, but companies that fail to observe the market place tend to pay a high price for their mistake.

    The action of competitors:

    Competitive intelligence activity will create an opportunity to understand what competitors are trying to do in other to outsmart their competitors.

    Discover new or potential competitors from Business:

    Competitive intelligence activity will provide an insight into the new segment or market a competitor is entering.

    Learn from the success and failure of other Competitors:

    Competitive intelligence activity will investigate if the customer is happy with competitors and use their findings as a yardstick for development.

    Know how to Increase the range and quality of acquisition target?

    Competitive intelligence activity will create insight on target company for acquisition because not all company that posses as a threat are worth acquiring. After all, some companies create deception.

    Know about new technology, products, and processes that affect business:

    Competitive intelligence activity tends to reveal if the project being embarked upon by their company is worth investing in or needs additional resources or the project needs to be shut down because some projects don’t worth any extra expense or resource.

    Know about political, legislative, or regulatory changes that can affect business:

    The competitive intelligence activity will help analyze the impact of a law or regulation proposed by the government because this government law affects everybody and forces all to change.

    Startup new business:

    Competitive intelligence activity will help organizations decide if they should enter a new business by observing the success and failure of the market competitor.

    Look at own business practice with an open mind:

    Competitive intelligence activity will expose organizations to new ideas and concepts because their method of business might be stale and outmoded. Also, it will help organizations to be externally focused.

    CI management tool is Help for implements:

    Competitive intelligence activity will provide organizations with relevant information that will assist organizations in re-engineering as well as enhancing customer satisfaction.

    Need and Benefits of Competitive Intelligence with Objectives and difference
    Need and Benefits of Competitive Intelligence with Objectives and difference, #Pixabay.

    Objectives of Competitive Intelligence:

    The following objectives below are;

    • To provide an advanced warning of risks and opportunities, such as mergers, takeovers, alliances, new products, and services.
    • To make sure that strategic planning decisions rely on relevant and up-to-date competitive intelligence.
    • Competitive Intelligence intends to make the firm more competitive concerning the environment in which the firm operates, i.e. competitors, customers, distributors, and other stakeholders.
    • To ensure that an organization can adapt and respond to the changing business environment.
    • To provide a periodic and systematic audit of the firm’s competitiveness; which provides an unbiased evaluation of the firm’s actual position, concerning the environment.

    Difference between Competitive Intelligence and Market Intelligence:

    These differences from infinite research; Often, we come across several terms in business that sound more or less the same; but they turn out to be completely different. Before getting into the differences, let us cut to the chase and get to the basic point of similarity between competitive intelligence and market intelligence. Both these types of intelligence help companies to gain a better foothold in the market and require a considerable amount of accurate research to succeed.

    So, what is the key difference between the two? Here goes – Competitive intelligence is the strategic study used by companies to understand their industry and track the moves of their rivals. On the other hand, market intelligence is a broader concept; which includes the research conducted by a company on the external market it wishes to enter, its competitors, and customers. By differences, you’ll understand the Benefits of Competitive Intelligence.

    What does Competitive Intelligence (CI) mean Introduction Meaning and Definition
    What does Competitive Intelligence (CI) mean? Introduction, Meaning, and Definition with PPT. #Pixabay.

    What meant by Competitive intelligence?

    DescriptionCompetitive intelligence is the action of defining, gathering, analyzing, and distributing intelligence about products, customers, competitors, and any aspect of the environment needed to support executives and managers in strategic decision making for an organization.

    What meant by Market intelligence?

    Description Market intelligence is the information relevant to a company’s markets, gathered and analyzed specifically for accurate; and, confident decision-making in determining strategy in areas such as market opportunity, market penetration strategy, and market development.

    But that’s not all; there are other factors as well that differentiates the two, curious to know what they are?

    The focus of the Data Collected:

    As discussed, market intelligence gives a larger picture to companies about the market and customers. This means that it is more client-focused, which helps companies to understand their customers and the general consumer behavior better. Competitive intelligence is more business-focused as it comprises data about a company’s competitors and their business strategies.

    Digging Deeper into the Data:

    Customers are in the spotlight in case of market intelligence; therefore, the data gathered in this type of business intelligence involves economic; and, social statistics of people such as demographics, population, consumption, and demand. On the other hand, competitive intelligence helps companies identify competitor’s strategies, their strengths, and weaknesses; the chunk of the market share they own; how their tactics are impacting your business, etc.

    The Game Plan:

    While the ultimate aim of both these strategies is to reduce business risk and up the game in the business; the data focus of both these techniques is very different. Therefore, their application in a formal business plan of a company also differs. Market intelligence employee by businesses to improve their existing product offerings and develop new and innovative products; which will ultimately result in improved customer loyalty.

    Competitive intelligence use by companies to plan specific strategies to overcome the competition from various competitors in the market. Each competitor will have different business strategies and tactics and with the help of competitor intelligence, companies can plan different counter-tactics for each of them.

    References:

    • Need and Benefits of Competitive Intelligence – www.mbaknol.com/modern-management-concepts/competitive-intelligence-ci/
    • Definition and Objectives of Competitive Intelligence – businessjargons.com/competitive-intelligence.html
    • Difference between Competitive Intelligence and Market Intelligence – www.infinitiresearch.com/thoughts/competitive-intelligence-vs-market-intelligence
  • Valuation of Goodwill: Meaning, Need, Factors, and Methods

    Valuation of Goodwill: Meaning, Need, Factors, and Methods

    Valuation of Goodwill: What is Goodwill? Meaning of Goodwill; Goodwill is the value of the reputation of a firm built over time concerning the expected future profits over and above the normal profits. So, what is the topic we are going to study; Valuation of Goodwill – Meaning, Need, Factors, and Methods (In Hindi). A well-established firm earns a good name in the market, builds trust with the customers, and also has more business connections as compared to a newly set up business. Goodwill in accounting is an intangible asset that arises when a buyer acquires an existing business.

    Here are explained how to Valuation of Goodwill? Meaning, Need, Factors, and Methods.

    Goodwill represents assets that are not separately identifiable. Goodwill does not include identifiable assets that are capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset, or liability regardless of whether the entity intends to do so.

    Valuation of Goodwill Meaning:

    There are various circumstances when it may be necessary to value goodwill. Some of the circumstances are;

    First, In the case of a partnership, when there is an admission, retirement, death or amalgamation, or a change in the profit-sharing ratio take place, the valuation of goodwill becomes necessary.

    Secondly, In the case of a company, when two or more companies amalgamate, or one company absorbs another company, or one company wants to acquire controlling interest in another company or when the Government takes over the business, valuation of goodwill becomes necessary.

    Third, In the case of a sole trader concern, goodwill is valued at the time of selling die business, to decide the purchase consideration.

    Finally, In the case of individuals, goodwill is valued for Estate Duty, Death Duty, etc. On the death of a person.

    Need for Valuation of Goodwill:

    Valuation of goodwill may make due to any one of the following reasons:

    A Sole-Proprietorship Firm:

    • If the firm sells to another person.
    • It takes any person as a partner, and.
    • It converts into a company.

    A Partnership Firm:

    • If any new partner takes.
    • Any old partner retires from the firm.
    • There is any change in the profit-sharing ratio among the partners.
    • Any partner dies.
    • Different partnership firms amalgamate.
    • Any firm sale, and.
    • Any firm converts into a company.

    A Company or Firm:

    • If the goodwill has already been written-off in the past but the value of the same is to records further in the books of accounts.
    • An existing company taking with or amalgamated with another existing company.
    • The Stock Exchange Quotation of the value of shares of the company is not available to compute gift tax, wealth tax, etc., and.
    • The shares are valued based on intrinsic values, market value, or fair value methods.

    Factors Affecting the Value of Goodwill:

    The following factors affect the value of goodwill:

    Location:

    A business which locates in the main market or at a place where there is more customer traffic tends to earn more profit and also more goodwill. If the firm centrally locates or locate in a very prominent place, it can attract more customers, increasing turnover. Therefore, the locational factor should always consider while ascertaining the value of goodwill.

    Time:

    The time dimension is another factor that influences the value of goodwill. The comparatively old firm will enjoy a more commercial reputation than the other one since the old one is better known to its customers, although both of them may have the same locational advantages.

    Nature of Business:

    A firm that deals with good quality products or has stable demand for its product can earn more profits and therefore has more value. This is another factor which also influences the value of goodwill which includes:

    • The nature of goods.
    • Risk involved.
    • Monopolistic nature of the business.
    • Benefits of Patents and Trade-marks, and.
    • Easy access to raw materials, etc.

    Capital Required:

    More buyers may interest to purchase a business that requires a comparatively small amount of capital but the rate of earning a profit is high and, consequently, raise the value of goodwill. On the contrary, for a business that required a large amount of capital but the rate of earning a profit is comparatively less, no buyer will interest to have the business and, hence, the goodwill of the said firm pull down.

    Owner’s Reputation:

    An owner, who has a good personal reputation in the market, is honest and trustworthy attracts more customers to the business, and makes more profits and also goodwill.

    Market Situation:

    The organization has a monopoly right or condition in the market or having limited competition, enables it to earn high profits which in turn leads to a higher value of goodwill.

    The trend of Profit:

    The value of goodwill may also be affected due to the fluctuation in the amount of profit (i.e., based on the rate of return). If the trend of profit is always rising, no doubt the value of goodwill will be high, and vice versa.

    The efficiency of Management:

    Efficient management may also help to increase the value of goodwill by increasing profits through properly planned production, distribution, and services. An organization with efficient management has high productivity and cost-efficiency. This gives it increased profits and also high goodwill. Therefore, to ascertain the value of goodwill, it must note that such efficiency in management must not be curtailed.

    Special Advantages:

    A firm that has special advantages like import licenses, patents, trademarks, copyrights, assured supply of electricity at low rates, subsidies for being situated in a special economic zone’s (SEZs), etc. possess a higher value of goodwill.

    Other Factors:

    • The condition of the money market.
    • The possibility of competition.
    • Government policy, and.
    • Peace and security in the country.

    Precaution to Take in Valuing Goodwill: We know that the amount of goodwill always pays for in the future. The buyer will pay a little more than the intrinsic value of assets only when he expects that he will enjoy some extra benefits from such goodwill shortly. On the other hand, if the buyer thinks that there is no possibility of having such advantages in the future, he will not be ready to pay anything for goodwill—even if the value of goodwill is very high.

    Methods of Valuing Goodwill:

    There are two methods of valuing goodwill:

    1. Simple profit method, and.
    2. Super-profit method.

    Simple Profit Method:

    There are two methods based on simple profit:

    • Purchase of Past Profit Method, and.
    • The capitalization of the Average Profit Method.
    A. Purchase of Past Profit Method:

    Under this method, goodwill is expressed as a purchase of a certain number of years’ profit based on the adjusted average profit of a given number of years.

    This method involves two steps:

    • The profits for an agreed number of years preceding the valuation average to ar­rive at the average annual profit earned during that period. This will have to adjust in the light of future possibilities and the average future maintainable profit determined. If the profits have been fluctuating, a simple average use. If profits show a steadily increasing or decreasing trend, appropriate weights are used giving greater weightage for profits of the later year.
    • The average future maintainable profit is multiplied by a certain number of years to find out the value of goodwill. The number of years selected for this purpose base on the expectation of the number of years’ benefit to derive in the future from the past association.

    For example, if the average future maintainable profit is Rs.25, 000 and it expects that this profit would earn for at least another 3 years, then the goodwill will be:

    Goodwill,

    = Rs. 75,000 (25,000 x 3).
    = Average of profit x number of years.

    The number of years over which the profits are averaged and the number of years’ purchase applied may vary considerably in practice but generally falls between one and five years. Estimating future profit beyond a period of say, 5 years would be quite difficult and unrealistic.

    The method suffers from two defects:

    • The difficulty of finding out the right number of years’ purchase of profits as it depends on so many factors and
    • Ignoring capital to employ in the business.
    B. The capitalization of the Average Profit Method:

    The following steps are to take in ascertaining the value of goodwill under this method:

    • Ascertain the average future maintainable profit, as explained already.
    • Capitalize this average profit at the normal rate of return on investment on the type

    Of business under consideration:

    This will give the net worth of the business.

    • Find out the value of net tangible assets (i.e., net assets other than goodwill) of the business.
    • Deduct the net tangible assets from the capitalized net worth of the business and the difference is goodwill.

    Super-Profit Method:

    Strictly speaking, goodwill can attach only to a business that is earning above-normal profits of super-profits. If there is no anticipated excess earning over normal earnings, there can be no goodwill.

    Such excess profits know as super-profits and it is the difference between the average profit earned by the business and the normal profit based on the normal rate of return.

    Hence for find­ing to the super-profits, the following information will require:

    • The estimated average future profits of the firm (ascertained as already explained),
    • The normal rate of return on investment and
    • The fair value of the average capital employed in the business.

    The normal rate of return:

    The normal rate of return refers to the rate of earnings that inves­tor, in general, expect on their investments in a particular type of industry. It varies depending upon general factors like the bank rate, general economic conditions, political stability, etc., and specific factors like period of investment, risk attached to the investment, etc.

    Normal profit and Super-profit:

    If the average capital employed and the normal rates of return know, the normal profit can ascertain. For example, if the average capital employed is Rs. 1, 00,000 and the normal rate of return is 10%, the normal profit is 1, 00, 000 x 10/100 = 10, 000.

    Super-profit is the simple difference between the actual average profit earned and the normal profit. If in the above example, the average profit is Rs. 25,000, then the super-profits will be Rs. 25,000 – Rs. 10,000 = Rs. 15,000

    Goodwill based on Super-Profit:

    There are four methods of calculating goodwill based on the super-profit.

    They are:

    • Purchase of super-profits Method,
    • Sliding-scale Valuation of Super-profit Method,
    • Annuity of Super-Profit Method and
    • The Capitalization of Super-Profit Method.
    1. Purchase of Super-profit Method:

    Goodwill as per this method = Super profit * Number of years. If, for example, the super-profit is Rs. 15,000 and goodwill agree to be 3 years’ purchase of super-profits, then the goodwill will be s.45,000 (15,000 * 3)

    2. Sliding-scale Valuation of super-profits Method:

    This is the only variation of the first method. It is based on the logic that the greater the number of super-profits, the more difficult it would be to maintain. Higher profit will naturally attract competition and soon the firm’s ability to make super-profits is curtailed.

    3. Annuity super-profit Method:

    Under this method, goodwill calculates by finding the present worth of an annuity paying the super profit per year, over the estimated period discounted at the given rate of interest. Usually, the reference to the Annuity Table will give the present value of an annuity for the given number of years and at the given rate of interest.

    Goodwill = super-profit * annuity.

    For example, if the super-profits are Ts. 15,000 and the annuity of re. 1 at 10% for 3 years is 2.48,685, then the goodwill is = Rs. 15,000 * 2.48,685 = Rs. 37,302.75. This method takes into consideration the interest loss involved in paying a lump sum as goodwill in anticipation of the future of profit.

    4. The Capitalization of Super-Profit Method:

    This is similar to the capitalization of the average profit method as already explained. Under this method, the super-profits when capitalized at the normal rate of return will give the value of goodwill.

    Goodwill,

    = Rs. 1, 50, 000 (Rs. 15, 000/10 x 100).
    = Super Profit/Normal rate of return x 100.

    This method gives the maximum value for goodwill. Since the contention that super-profits will continue for long is unreasonable, this method is not safe for one to follow.

  • Factors of Sales Forecasting

    Factors of Sales Forecasting

    Explore essential factors of sales forecasting to improve accuracy and drive business growth. Learn how to leverage data for better decision-making. The management of a firm is required to prepare its forecast of the share of the market that it can hope to capture over the period of forecasting. In other words, the sales forecast is an estimate of the sales potential of the firm in the future. All plans are based on the sales forecasts. Sales Forecasting is the projection of customer demand for the goods and services over a period of time. A businessman who invests a large amount of capital in his business, cannot afford to work haphazardly. So, what we discussing is – Meaning, Definition, Need, and Factors of Sales Forecasting.

    The Concept of Forecasting explains Sales Forecasting by Meaning, Definition, Need, and Factors.

    In this article is discussing, Sales Forecasting: Meaning of Sales Forecasting, Definition of Sales Forecasting, Need for Sales Forecasting, and Factors of Sales Forecasting. This forecast helps the management in determining as to how much revenue can be expected to be realized. How much to manufacture, and what shall be the requirement of men, machine, and money. Future is uncertain. Man thinks about the future. He may be a businessman, a broker, a manufacturer, a commission agent etc.

    All guess about the future in their respective field of interest. We try to know, through a clear imagination, what will be happening in the near future—after a weak, month or year. It can be called forecast or prediction. The process of forecasting is based on reliable data of past and present. Forecasting is not new, as it has been practiced from time immemorial.

    Meaning of Sales Forecasting:

    Any forecast can be termed as an indicator of what is likely to happen in a specified future time frame in a particular field. Therefore, the sales forecast indicates as to how much of a particular product is likely to be sold in a specified future period in a specified market at the speci­fied price. Accurate sales forecasting is essential for a business house to enable it to produce the re­quired quantity at the right time.

    Further, it makes the arrangement in advance for raw mate­rials, equipment’s, labor etc. Some firms manufacture on the order basis. But in general, the firm produces the material in advance to meet future demand. Forecasting means estimation of quantity, type, and quality of future work e.g. sales. For any manufacturing concern, it is very necessary to assess the market trends sufficiently in ad­vance.

    This is a commitment on the part of the sales department and future planning of the entire concern depends on this forecast. It is the estimate of the number of sales to be expected for an item/product or products for a future period of time. Except the industries based on job order, almost all the enterprises produce in advance to meet the future requirements. Thus accurate sales forecasting is essential for an enterprise to enable it to produce the required number of items at right time.

    Definition of Sales Forecasting:

    Forecasting is one of the important aspects of administration. The comer-stone of successful marketing planning is the measurement and forecasting to market demand.

    According to the American Marketing Association,

    “Sales forecast is an estimate of Sales, in monetary or physical units, for a specified future period under a proposed business plan or programme and under an assumed set of economic and other forces outside the unit for which the forecast is made.”
    “An estimate of sales in dollars or physical units for a specified future period under a proposed marketing plan or programme and under an assumed set of economic and other forces outside the unit for which the forecast is made.”

    It is an estimation of sales volume that a company can expect to attain within the plan period. A sales forecast is not just a sales predicting. It is the act of matching opportunities with the marketing efforts. It is the determination of a firm’s share in the market under a specified future. Thus sales forecasting shows the probable volume of sales.

    According to Candiff and Still,

    “Sales forecast is an estimate of sales during a specified future period, whose estimate is tied to a proposed marketing plan and which assumes a particular state of uncontrollable and competitive forces.”

    Thus we can define sales forecasting as, estimation of type, quantity, and quality of future sales. The goal for the sales department is decided on the basis of this forecast and these forecasts also help in planning the future development of the concern. The sales forecast forms a basis for production targets. From above, looking to its importance, it is essential that the sales forecast must be accurate, simple, easy to understand and economical.

    Thus we can say that a sales forecast is an estimate of the number of sales for a specified future period under a proposed marketing plan or programme. They can also be defined as an estimate of sales in terms of money or physical units for a specified future period under a proposed marketing plan or programme and under an assumed set of economic and other forces outside the unit for which the forecast is made.

    Need for Sales Forecasting:

    The following Need for Sales Forecasting below are:

    • The management of the enterprise can take the decision regarding operations planning, scheduling, production programming inventories of various types, physical distribution and operating profits on the basis of sales forecasts.
    • Long-term sales forecasts can help in deciding investment proposals. Such as modernization, expansion of existing units, diversification of product lines etc.
    • Sales forecasts are essential to make proper arrangement for training. The manpower in its own unit or sending them to other industries in the country or abroad to meet the future needs of expertise.

    Factors of Sales Forecasting:

    Factors influencing a Sales Forecasting; A sales manager should consider all the factors affecting the sales while predicting the firm’s sales in the market.

    An accurate sales forecast can be made if the following factors are considered carefully:

    General Economic Condition:

    It is essential to consider all economic conditions relating to the firm and the consumers. The forecaster must see the general economic trend-inflation or deflation, which affect the business favorably or adversely. A thorough knowledge of the economic, political and the general trend of the business facilities to build a forecast more accurately. Past behavior of the market, national income, disposable personal income, consuming habits of the customers etc., affect the estimation to a great extent. Two types of Economic; microeconomic and macroeconomic as well as short-term market and long-term market.

    Consumers:

    Products like wearing apparel, luxurious goods, furniture, vehicles. The size of the population by its composition-customers by age, sex, type, economic condition etc., have an important role. And the trend of fashions, religious habits, social group influences etc., also carry weights. Also, The consumer is the one who pays something to consume goods and services produced. As such, consumers play a vital role in the economic system of a nation. Without consumer demand, producers would lack one of the key motivations to produce: to sell to consumers.

    Industrial Behaviors:

    Markets are full of similar products manufactured by different firms, which compete among themselves to increase the sales. As such, the pricing policy, design, advanced technological improvements, promotional activities etc., of similar industries must be carefully observed. A new firm may come up with products to the markets and naturally affect the market share of the existing firms. Unstable conditions—industrial unrest, government control through rules and regulations, improper availability of raw materials etc., directly affect the production, sales, and profits.

    Changes within Firm:

    Future sales are greatly affected by the changes in pricing, advertising policy, quality of products etc. A careful study in relation to the changes in the sales volume may be studied carefully. Sales can be increased by the price cut, enhancing advertising policies, increased sales promotions, concessions to customers etc.

    Period:

    The required information must be collected on the basis of the period—short run, medium run or long run forecasts. A period of sales depending on the market requires. For example, Some product sale short period. As well as medium or long periods all required, is product demands and supply.

    Some Factors also Considered:

    Following factors should be considered while making the sales forecast:

    • Market Competition: To assess demand, it is the main factor to know about the existing and new competitors and their future programme, the quality of their product, the sales of their product. The opinion of the customers about the products of other competitors with reference to the product manufactured by the firm must also be considered.
    • Technology Changes: With the advancement of technology, new products are com­ing in the market and the taste. The likings of the consumer’s changes with the advancement and change of technology.
    • An action of Government: When the government produces or purchases. Then depending upon the government policy and rules, the sales of the products are also affected.
    • Factors Related to the Concern Itself: These factors are related to the change in the capacity of the plant. Change in price due to the change in expenditure, change in product mix etc.

    Accurate sales forecasting is essential for a business house to enable it to produce the re­quired quantity at the right time. Further, it makes the arrangement in advance for raw mate­rials, equipment’s, labor etc. Also, Many firms manufacture on the order basis. But in general, every firm produces the material in advance to meet future demand.

  • Financial Planning: Meaning, Definition, Objectives, and Importance

    Financial Planning: Meaning, Definition, Objectives, and Importance

    What is Financial Planning? Financial planning is an important part of financial management. A financial plan is an estimate of the total capital requirements of the company. It selects the most economical sources of finance. It also tells us how to use this finance profitably. The financial planning gives a total picture of the future financial activities of the company. It is the process of determining the objectives; policies, procedures, programmes, and budgets to deal with the financial activities of an enterprise. Financial planning is also known as capital planning. So, what we discussing is – Financial Planning: Meaning, Definition, Objectives, and Importance.

    The Concept of Financial Planning explains their key points into Meaning, Definition, Objectives, and Importance.

    In this article we Discuss; Financial Planning: Meaning of Financial Planning, Definition of Financial Planning, Objectives of Financial Planning, Need for Financial Planning, and the Importance of Financial Planning. Meaning and Definition: Financial planning reflects the needs of the business and is integrated with the overall business planning. Proper financial planning is necessary to enable the business enterprise to have the right amount of capital to continue its operations efficiently.

    Financial planning involves taking certain important decisions so that funds are continuously available to the company and are used efficiently. These decisions highlight the scope of financial planning. The financial plan is generally prepared during the promotion stage. It is prepared by the Promoters (entrepreneurs) with the help of experienced (practicing) professionals. The promoters must be very careful while preparing the financial plan. This is because a bad financial plan will lead to over-capitalization or under-capitalization. It is very difficult to correct a bad financial plan. Hence immense care must be taken while preparing a financial plan.

    #Definition of Financial Planning:

    Financial planning, also called budgeting, is the process of setting performance goals and organizing systems to achieve these goals in the future. In other words, planning is the process of developing business strategies and visions for the future. It’s big picture stuff. Financial Planning is the process of estimating the capital required and determining its competition. It is the process of framing financial policies in relation to procurement, investment, and administration of funds of an enterprise.

    #Objectives of Financial Planning:

    Financial planning is done to achieve the following two objectives:

    To ensure availability of funds whenever these are required:

    The main objective of financial planning is that sufficient fund should be available in the company for different purposes such as for the purchase of long-term assets, to meet day-to-day expenses, etc. It ensures timely availability of finance. Along with availability financial planning also tries to specify the sources of finance.

    To see that firm does not raise resources unnecessarily:

    Excess funding is as bad as inadequate or shortage of funds. If there is surplus money, financial planning must invest it in the best possible manner as keeping financial resources idle is a great loss for an organization.

    Others Financial Planning has got many objectives to look forward to:

    • Determining capital requirements; This will depend upon factors like the cost of current and fixed assets, promotional expenses and long-range planning. Capital requirements have to be looked with both aspects: short- term and long- term requirements.
    • Determining capital structure; The capital structure is the composition of capital, i.e., the relative kind and proportion of capital required in the business. This includes decisions of debt-equity ratio- both short-term and long-term.
    • Framing financial policies with regards to cash control, lending, borrowings, etc.
    • A finance manager ensures that the scarce financial resources are maximally utilized in the best possible manner at least cost in order to get maximum returns on investment.

    Financial Planning includes both short-term as well as the long-term planning. Long-term planning focuses on capital expenditure plan whereas short-term financial plans are called budgets. Budgets include a detailed plan of action for a period of one year or less.

    #Need for Financial Planning:

    The following financial planning below are:

    • Determine the financial resources required to meet the company’s operating programme.
    • Forecast the extent to which these requirements will be met by internal generation of funds and the extent to which they will be met from external sources.
    • Develop the best plans to obtain the required external funds.
    • Establish and maintain a system of financial control governing the allocation and use of funds.
    • Formulate programmes to provide the most effective profit-volume-cost relationships.
    • Analyze the financial results of operations, and.
    • Report facts to the top management and make recommendations on future operations of the firm.

    #Importance of Financial Planning:

    Sound financial planning is essential for the success of any business enterprise. It will provide policies and procedures to achieve close coordination between the various functional areas of business. This will lead to the minimization of wastage of resources. Management can follow an integrated approach to the formulation of financial policies, procedures, and programmes only if there is a sound financial plan.

    The important benefits of financial planning to a business are discussed below:

    • Financial planning provides policies and procedures for the sound administration of the finance function.
    • Financial planning results in the preparation of plans for the future. Thus, new projects could be undertaken smoothly.
    • Adequate funds have to be ensured.
    • Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.
    • Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning.
    • Financial Planning helps in making growth and expansion programmes which helps in long-run survival of the company.
    • Financial planning ensures required funds from various sources for the smooth conduct of business.
    • Uncertainty about the availability of funds is reduced. It ensures the stability of business operations.
    • Financial planning attempts to achieve a balance between the inflow and outflow of funds. Adequate liquidity is ensured throughout the year. This will increase the reputation of the company.
    • Cost of financing is kept to the minimum possible and scarce financial resources are used judiciously.
    • Financial planning serves as the basis of financial control. The management attempts to ensure utilization of funds in tune with the financial plans.
    • Financial Planning reduces uncertainties with regards to changing market trends which can be faced easily through enough funds, and.
    • Financial Planning helps in reducing the uncertainties which can be a hindrance to the growth of the company. This helps in ensuring stability and profitability in concern.

    Finance is the life-blood of the business. So financial planning is an integral part of the corporate planning of the business. Financial Planning is the process of framing objectives, policies, procedures, programmes and budgets regarding the financial activities of concern. This ensures effective and adequate financial and investment policies. All business plans depend upon the soundness of financial planning.

    Financial Planning Meaning Definition Objectives and Importance
    Financial Planning: Meaning, Definition, Objectives, and Importance. Image credit from #Pixabay.