Financial Accounting

Name:

Lecturer:

Course:

Date:

Financial Accounting

Case Study

http://www.cfo.com/article.cfm/13400804?f=search

Every company and any business should keep financial records. Good inventory management is important because it helps a business to identify the areas responsible for making losses. Inventory includes the raw materials, supplies, work in progress and finished goods. It is especially important in businesses that have problems with their cash flows and they cannot account for the money they receive. These words are echoed by Ken Goldman the former CFO of Siebel Systems.

Introduction

The context of this paper aims to discuss inventory management as a vital paradigm to maintaining structure and organizations in various processes within an organization. The article used as case to the discussion in context was selected because it was relevant to the topic at hand. The person who was interviewed is an authority in such matters. He has worked as a chief financial officer with many companies over the years. He did not just give a lecture on why the companies ought to have good inventory management, but also gave illustrations of his work. He has brought up a company that was making losses up to a point of profitability; arguing it as a positive result from good inventory management. Points on inventory management will be in retrospect, be discussed in the paper with inference based on the article being studied. Eventually, a suitable conclusion will be utilized to summarize the key arguments developed within the discussion.

Discussion

Significant business and personal issues

The context of the article being discussed emphasizes the need of instituting inventory management measures to provide information that can be used to reflect the general trend of the organization within the business sector as well as internal organizational processes. There is plenty of useful information in the article. There is a lot of advice such as maintaining controls, financial discipline, having enough cash available and having a strong balance sheet. The advice is aimed especially at people who want to avoid financial crisis such as that, which was experienced by many companies in 2008. The companies that were affected can in turn find the information very relevant since they can learn how to avoid potential disasters. For companies that are in the brink of going under, the author to the article gives advice on how to turn potential loss to success.

The company was making losses but Goldman was able to turn the situation to a positive outcome. By reducing expenses, increasing revenues and generally improving their inventory management, the company was able to grow to a level where they had ten million dollars in profit and revenue of two hundred million dollars. As Goldman says, “there is an opportunity even in the worst of times.” In retrospect, there is always a chance of recovery even after a recession. Goldman urges employers to use such avenues to look for the best people to hire, invest and expand. Eventually, the author concludes on the importance of having enough cash. Without it, it can be practically impossible to put all the advice in practice.

New insight

The things that Goldman did to improve the situation at Fortinet are usually what literature contexts quote as good business practice. However, people face a lot of difficulty trying to put such ideas into perspective and practicing them to a point of realization. Goldman however provides a rather easy approach through exhibiting the value of good leadership as a key paradigm to improving organizational processes. Good leadership is very important in any business. The people follow what the leader does. The only way to do something and to do it successfully is to start doing it individually as a leader. Leadership is therefore key in a successful business. A leader reflects what an organization is. The employees of a company are also a reflection of the leader. Without successful leadership, even the best of plans can be wasted.

Consequently, we note that Goldman (as a good leader), introduced the idea of forecasting and reliability, which are essential items: if at all, a business wants to have investor confidence. Goldman also argues the aspect of the company placing value on itself. The company should not just do anything for the sake of investors; rather, the employees of the company ought to instill the same discipline on themselves. Finally, relevance on financial records is stressed through an understanding that they should not just be prepared for the investors and other shareholders but they should also be prepared for internal purposes as well.

Purpose of new information in future

Inventory management seems to be something that any structured business should peg as vital to success. It seems to transcend present economic situations whether positive and negative; eventually appearing as a paradigm, that spells better outcomes with proper management. This in retrospect means proper management in inventory records. Such records though at times deemed a bookkeeping nightmare in many organizations could be utilized in future settings as bases to peg corrective development in case of a negative trend in organizational performance. Again, these records are in themselves templates or pilots to structuring future organizational development projects. Through good inventory management at present, future company executives may then be able to understand the organization even better. Therefore, the information learnt from such and relevant records will be of great use in future settings.

Conclusion

            Everyone in business should strive to learn and know inventory management. Successful inventory management is beneficial to the manager, the employees, investors and the other shareholders. It helps to identify the direction, which a business should take when faced with a financial crisis. A manager can distinguish between the significant costs and those that are less significant. This coupled with other aspects such as leadership, forecasting, valuing the company and the employees are some of the things that make a company successful.

 

Work Cited

Reason, Tim. Leadership in Finance: Fortinet’s Ken Goldman. CFO Magazine. 21 September 2010. Web. March 31 2009.