1 Explain the importance of effective financial management systems within own work setting

Charities are increasingly operating in a rapidly changing and competitive environment. To survive this challenging environment, you will need to ensure the best and most efficient use of your financial resources. Sound financial management will provide trustees and managers in your organisation with a basis on which to do this.
Financial management is more than keeping accounting records. It is an essential part of organisational management and cannot be seen as a separate task to be left to finance staff or the honorary treasurer. Financial management involves planning, organising, controlling and monitoring financial resources in order to achieve organisational objectives.
You can only achieve effective financial management if you have a sound organisational plan. A plan in this context means having set objectives and having agreed, developed and evaluated the policies, strategies, tactics and actions to achieve these objectives.
Sound financial management will involve you in long-term strategic planning and short-term operations planning. This financial planning should become part of your organisation's ongoing planning process.
Good financial management will help your organisation to:
• Make effective and efficient use of resources
• Achieve objectives and fulfil commitments to stakeholders
• Become more accountable to donors and other stakeholders
• Gain the respect and confidence of funding agencies, partners and beneficiaries
• Gain advantage in competition for increasingly scarce resources
• Prepare for long-term financial sustainability.

There are four components of good financial management:
1. A clear finance strategy
2. A plan for generating income
3. A robust financial management system
4. A suitable internal environment.

A Financial Management Systems
There certain principles when developing a financial management system. These...