Funds are the money and resources that an organization uses to implement their goals and make payments to their service providers. All organizations run on funds and this is their key element. The sources and management of these funds varies from organization to organization and are all carefully considered. The funds are the center of functions and are what is required to run the organization.
Funds management is meant to assist in the creation of a budget. This is a forecast of the details of finances in the organization and how it will be utilized. The individual burdened with the task of fund management should be able to manage all amounts coming in as revenue, all monies going out as expenses and ensure that they are able to sustain each other. The expenses should not exceed what is being earned. Once in practice, the budget can be adjusted to prevent an excess of expenditure over income.
In order to achieve a balance, there may be need to borrow from elsewhere be it internally or externally. Money sourced from other departments or a reserve set aside for that purpose is inrtnal. External borrowing constitutes funding from lenders like banks and other well established institutions that are in the business of lending. Alternatively, adjustments of expenditureo priorities is an option. An institution should learn to use what they have and also make choices on the amount of risk they are willing to face in case they have to take a gamble.
Efficient fund management keeps tabs on all aspects of usage and income. There should be a keen eye on where the money is spent and the justifications given on the expenditures. The amounts coming in should also be of closely scrutinized to inform the manager about what he or she is to check on, recommend or keep a close eye on. Each fund area is allocated its own capital and each section of the organization should be clear on where money and resources will come from.
When funds are received, allocation is made to each section in accordance to their needs and performance. The sections of the organization should provide a clear guide about how money is allocated. To realize how they are doing, a comparison should be made with what was planned and what actually took place. This means the budget and actual cash flow similarities and differences. The two should not differ much as that would mean that they are not fully utilizing resources or they are misusing what has been allocated; this sometimes causes fuding shortfalls. Constant differences may mean that there may be need to adjust the budget.
Funds management caters to items in the statement of financial position and also items not in the statement. The primary goal is to maximize the positive effect on the interest being earned and paid out.
Fund management points out the variety of funds available, and that includes where financing is sourced from and how widespread that funding is. It also points out the ways and means of using the funds in the best possible way.