How can Financial Applications help in realizing Organizational Objectives?

Return On Investment (ROI) is an important barometer for any business. Let us take the objective of improving ROI which can be monitored through various Financial Applications. Clarity on relationship of various Financial Applications with ROI, can help us appreciate how Financial Applications are important for achieving business objectives.

• ROI can improve by:

Increasing Profit or

Reducing Investment.

• Profits can increase through:

Increase in Revenue or

Reduction in Costs.

• Increase in Revenue could be due to:

Better price realization or

Higher volumes.

• Reduction in Costs could be

In Variable Cost (like better procurement of Raw Materials, or reduced Wastages) and

In Overheads like Manpower Cost or General Administration Expenses.

Coming to the Investment side of ROI:

• Reduction in Investment could be due to

Planned minimal Investment in Fixed Assets and good utilization of Fixed Assets or

Managing with lower Working Capital.

• Reduction in Working Capital could be through

Lower Current Assets (Inventory, Receivables and so on) or through

Higher Current Liabilities like better Payment Terms with Vendors.

Improve Return on Investment, Improve Margins, Improve Profitability, Reduce Costs, Strengthen Controls, Reduce Risks, timely and relevant information on performance to stakeholders are common business requirements. All the above information needs are met through various Financial Accounting and Management Accounting reports making Financial Applications relevant for meeting business objectives.