Definition and Concept of Financial Management

Definition of Financial Management has developed from the definition of management that only prioritize to the activity of obtaining funds until the activities of obtaining and using funds and management of assets. Financial Management (Finance Management) is the entire activity or activities of the company in the context of the use and allocation of company funds efficiently. According to George R. Terry, management includes four activities often known as POAC (Planning, Organizing, Actuating, and Controlling)

According to Bambang Riyanto: financial management is all company activities related to the procurement of funds required with minimal cost and most favorable conditions with efforts to use the funds as efficiently as possible.

Concept of Financial Management

To perform its functions, a company must perform the functions well, since in the implementation, each function relates each other. Financial management is the management of the financial functions. Meanwhile, the function of finance is the main activities performed by those who are responsible in the particular field. The functions of financial management are using and placing the funds.

Financial management is all company activities related to how the company obtains funds, uses the funds and manages assets in accordance with the overall company's objectives.

Financial management is related to three activities:

Activity of fund use, it is the activity to invest funds in various assets.

Fundraising activity, it is activity to obtain funding sources, both from internal and external funding sources.

Asset management activity, after funds are obtained and allocated in the form of assets, the funds should be managed as efficient as possible.

Financial management is all activities by asset acquisition, financing and management with some overarching objectives. Therefore, decision-making functions of financial management can be divided into three main areas: decisions in respect of investment, financing, and asset management.

Purpose and Steps of Financial Management

Purpose of Financial Management is to maximize the value of a company. Thus, if one day the company is sold, the price can be set as high as possible. A manager must also be able to suppress the flow of money circulation in order to avoid unwanted actions. Efficient financial management needs the existence of purposes and goals, which are used as standard in assessing the efficiency of financial decisions.

The company's goal is maximizing the welfare of the owner. The amount of stock owned shows the ownership evidence of a company. Shareholder wealth is shown by the market price of the company, which is also reflection of investment, financing and asset management decisions. The success of a business decision is judged by the impact on stock prices.

Steps in Financial Management

Management has three important steps; planning, implementation and research, the three steps when implemented financial management becomes financial planning, implementation and assessment steps.

1. Planning (Financial Forecasting)

Financial forecasting in financial management is used to estimate the financial needs in the future. If the financial management does not try to anticipate the future financing needs of the company, then crisis will happen when treasury income is less than treasury outcome. Good planning is intended to anticipate and prepare the company to face the future condition, which, when the company should require the presence of additional finance, and also when the company is not able to generate treasury income.

2. Implementation (financial planning and budgeting)

To obtain more accurate estimate of the amount and timing of financing needs, it requires treasury budget. Percentage method for financial forecasting provides very useful introduction and low cost to develop more detailed treasury budget, which will be used to estimate the financing needs.

3. Research (budget function)

Beside as a tool for planning and management control, budget is also a tool for management to lead an organization in strong or weak position (Nana Fatth, 2000).

Functions of Financial Management

Functions of Financial Management

a. Investment Decision

Investment is defined as an investment of company in real and financial assets. Financial decision is a decision on what assets will be managed by the company. Investment decision will directly influence to the amount of investment profitability (return on investment) and treasury flow of the company in the future.

b. Financing Decision

Financing decision studies funding sources on the liabilities side. Therefore, it needs to be considered a source of funds that has most minimal costs and favorable conditions. Fulfillment of funds can be done through internal and external company resources.

c. Dividend Decision

This decision is made to determine:

1. The amount of profit percentage distributed to shareholders in the form of cash dividends

2. The dividend stability to be distributed

3. Stock dividend

4. Stock split

5. Withdrawal of stock outstanding.

Here is a brief explanation of Financial Management Functions:

Financial planning, making income and outcome planning and other activities for a certain period.

Financial budgeting, following up of financial planning to make detailed outcome and income.

Financial Management, using company funds to maximize the funds available in a variety of ways.

Financial searching, finding out and exploiting the resources available for the operational activities of the company.

Financial storage, collecting funds and saving and securing the funds.

Financial control, evaluation and improvement of finances and financial systems in the company.

Financial Audit, internal audit on the financial company to avoid deviations.

Financial reporting, providing information about the company's financial condition as well as evaluation.

Principles of Financial Management

Principles of Financial Management

Financial Management in practice is an activity performed and appearing in order to make the finance of the company or organization ideal.

Therefore, in making financial management system, we need the following principles as the basis:

1. Consistency

In this principle, a system and financial policy must be consistent, not change from period to period, but keep in mind that the financial system does not mean that there is no adjustment if there is a significant change in the company.

2. Accountability

This principle is a moral or legal obligation, which is inherent to the individual, group or company to give explanation of how the funds or authority given to a 3rd party used.

3. Transparency

Management should be open to the work, provide information about the plan and all the activities concerned, including providing reasonable, complete, timely and accurate financial report which can be accessed easily by an interested party, if it is not transparent, it can indicate that management has hide something.

4. Viability

To maintain the financial company, all operational outcome or at strategic level must be adjusted to the existing funds.

5. Integrity 

Every individual should have integrity level that is capable in running operations. In addition, the records and financial report must be maintained the integrity with the completeness and the accuracy of financial records.

6. Stewardship

Financial management should be able to manage capably of the funds obtained and provide assurance that funds received will be used to realize the goals that have been set.

7. Accounting Standards

Financial accounting system used must be in accordance with the principles and standards of applicable accounting rules to make the financial report produced easily perceived and understood by all interested parties.

Functions of Human Resource Management

There are some functions of human resource management:

1. Planning 

It is a conscious effort in making a decision that has been considered about what will be done in the future by a company to achieve the intended purpose.

2. Recruitment 

Effective recruitment will provide an employment opportunity for people who have the ability and skills meeting the qualifications and specifications of the job.

3. Selection

Selection of labor is the process of finding suitable and right employment of the candidates available.

4. Orientation, Training and Development

All activities to provide, obtain, and improve and develop job competence, productivities, discipline, attitude and work ethos at certain skill and expertise levels in accordance with the level and qualification of the job and position.

5. Work Evaluation

It is not less important than the other management functions. Evaluation Function of human resource management is useful so that the company no longer makes the same mistake.

6. Compensation

Compensation function is granting of fair and decent remuneration based on the labor responsibilities and achievement.

7. Integration

The integration is the activity to unite between the company interests and the needs of employees, thus it creates beneficial partnership to both parties.

8. Maintenance

Maintenance function is activity to maintain or even improve mental, physical and loyalty conditions of workers in order to create long cooperation.

9. Dismissal

It is discontinuation of employment relationship between the labor and the company caused by something that resulted in the rights and obligations ended between the employer (company) and employee. 

How to Measure Motivation

There are several ways to measure motivation:

1. Projective Test

One of projective techniques widely known is Thematic Apperception Test (TAT). In this test, client is given a picture and the client is asked to make a story out of the picture.

In theory of Mc Leland, it was explained that humans have three needs: need for achievement (n-ach), need for power (n-power), and need for affiliation (n-aff). From the content of the story, we can examine a client's underlying motivation based on the concept needs.

2. Questionnaire

The trick is asking client to fill out a questionnaire containing questions that can provoke the client�s motivation.

For example is EPPS (Edward's Personal Preference Schedule). This questionnaire consists of 210 numbers which each number consists of two questions. Client is asked to choose one of these two questions that is more representative of him. From filling the questionnaire, it will be known the motivation of the client.

3. Observation

Another way to measure motivation is creating a situation so that the client can bring the behavior that reflects his motivation.

For example, to measure the desire to excel, the client is asked to produce origami in a certain time limit. The behavior observed is, whether the client uses the feedback given, takes risky decisions and concerns with the quality rather than quantity of work.

Definition of Customer Behavior and How to Examine Customer Behavior

Definition of Customer Behavior and How to Examine Customer Behavior 

Costumer behavior is a person's processes and activities related to search, selection, purchase, use, and evaluation of products and services to meet the needs and desires. However, some people interpret costumer behavior as things underlying to make purchase decision, such as for something that has low selling price, then the decision process is done easily, while for things with high selling price, then the decision-making process will be done with careful consideration. 

According to some experts are as follows: 

a. Schiffman and Kanuk 

Costumer behavior is process passed by someone in finding, buying, using, evaluating and acting post-consumption of products and services, as well as ideas that are expected to meet their needs. 

b. Engel, Blackwell and Miniard 

Costumer behavior is act of service products, including the decision processes preceding and following the actions that are directly involved in obtaining, consuming and disposing a product or service, including the decision processes that precede and follow the action. 

There are three main approaches in examining costumer behavior. The first approach is interpretive approach. This approach digs deeply into costumer behavior and the underlying case. The study is conducted through long interviews and focus group discussions to understand what the meaning of a product and service to the costumers and what is perceived and experienced by costumers when buying and using it. 

The second approach is traditional approach based on the theory and methods of cognitive, social, and behavioral psychology and sociology. This approach aims to develop theories and methods to explain costumer behavior and decision-making. The study is conducted through experiments and surveys to test the theory and seek an understanding of how a costumer process information, make decisions, and the influence of social environment on costumer behavior. 

The third approach is called as science of marketing that is based on the theory and methods of economics and statistics. This approach is done by developing and testing a mathematical model based on the hierarchy of human needs according to Abraham Maslow to predict the effect of marketing strategy to the choice and consumption patterns, known as moving rate analysis.

Costumer Consideration Process

Costumer Consideration Process 

Before and after makingpurchase, a customer will perform a number of costumer consideration processes: 

Problem recognition 

Costumers will buy a product as a solution to the problems faced. Without problem recognition, customers are not able to determine the products to be bought. 

Information source 

After understanding the problems that exist, costumers will be motivated to seek information to solve the existing problems through searching information. The searching process can be derived from the memory (internal) and based on the experience of others (external). 

Alternative evaluation 

After a costumer has a wide range of information, he will evaluate the alternatives existing to overcome the problems faced. 

Purchase decision 

After costumers evaluate several existing strategy alternatives, they will make a purchase decision. Sometimes the time taken to make purchasing decisions by creating actual purchase is not same because of the other things that need to be considered. 

Post-purchase evaluation 

Evaluation process done by costumers does not just end at the stage of purchase decision-making. After buying the product, the costumer will evaluate whether the product is in accordance with expectations or not. In this case, there are satisfaction and dissatisfaction of customer. 

Costumers will be satisfied if the product is in accordance with the expectations and will further increase the demand for the product brand in the future. In contrast, they will feel dissatisfied if the product is not in accordance with expectations and it will reduce costumer demand in the future.

Definition and Purposes of Work Motivation

Flipo (1984) theorized that motivation is a direction of employees in an organization to cooperate in achieving wishes of the employees in order to achieve organizational success. According to Terry G (1986), motivation is a desire contained in an individual encouraging him to perform action (behavior).

In a person, there is a need or desire (wants) of situation outside the object, then how one connects between the needs and the situation outside the object in order to meet the needs intended. Therefore, motivation is a reason (reasoning) of a person to act in order to meet the needs.

In general, the goal of motivation is to move or inspire someone in arising the desire and willingness to do something so as to obtain results or achieve certain goals.

The success of an institution or organization is determined by two main factors; human resources, employee or labor, supporting facilities and infrastructure or work facility. Human resource or employee is more important than supporting infrastructure. Motivation in the organization has very broad intent and purpose.

The purposes of motivation

1. Encourage passion and spirit of employee 

2. Improve employee satisfaction which ultimately will improve the performance

3. Improve employee productivity

4. Improve employee loyalty and integrity

5. Improve employee discipline

6. Improve employee attendance

Definition and Purposes of Work Motivation

Flipo (1984) theorized that motivation is a direction of employees in an organization to cooperate in achieving wishes of the employees in order to achieve organizational success.

According to Terry G (1986), motivation is a desire contained in an individual encouraging him to perform action (behavior).

In a person, there is a need or desire (wants) of situation outside the object, then how one connects between the needs and the situation outside the object in order to meet the needs intended. Therefore, motivation is a reason (reasoning) of a person to act in order to meet the needs.

In general, the goal of motivation is to move or inspire someone in arising the desire and willingness to do something so as to obtain results or achieve certain goals.

The success of an institution or organization is determined by two main factors; human resources, employee or labor, supporting facilities and infrastructure or work facility. Human resource or employee is more important than supporting infrastructure. Motivation in the organization has very broad intent and purpose.

The purposes of motivation

1. Encourage passion and spirit of employee 

2. Improve employee satisfaction which ultimately will improve the performance

3. Improve employee productivity

4. Improve employee loyalty and integrity

5. Improve employee discipline

6. Improve employee attendance

Definition and Types of Small Business

Small Business is a pillar of the economy of a country. For example, in United State, more than 80% of the business is small business.

John Naisbitt in his lecture on global entrepreneur forum 95 in Singapore stated that there is a tendency towards 2000. The tendency includes shifting world activities and great players or conglomerates to the direction of small players that use a business in small and medium scale.

He also mentioned that the small players will be major players in the great economy.

Definition of business is all activities that seek profits by obtaining the necessities of goods and services to others (Nickels, McHugh, and McHugh, 1996).

The definition of small business is a business owned independently and the activities are not dominant and meet certain standards (Luthans and Hodgetts, 1989).

Types of small business are as follows:

1. Services Business 

2. Retail Business 

3. Wholesale Business 

4. Manufacturing Business 

5. Agricultural Business 

References:

Nickels, W.G., McHugh, J.M., McHugh, S.M, 1996, Understanding Business, Chicago : Irwin.

Luthans, F, Hodgetts, R.M, 1989, Business, Chicago : The Dryden Press.

Tips for Starting a New Business

An entrepreneur must have a thorough plan of planning in order to avoid a failure to execute new business. The plan includes: What business is owned, Starting your own or buying an existing company, Knowing what and where the market for the product or the service.

Starting is not easy because of many challenges that must be faced. Note Tips for Starting a New Business below. 

To be successful at the beginning according to Harper (1991), it requires:

1. Very solid business opportunities.

2. Skills and abilities in the field that will be practiced.

3. The correct approach in running the business.

4. Sufficient funds to start and operate a business, so that can stand alone.

In starting a new business, we have to study the market situation and industry situation that will be entered. The market situation may have been met by other competitors, so that not easy to get into, maybe also the target market has been saturated.

Production and marketing orientation era likely soon pass into new era that is competition era. For that, it is essential to analyze the situation of the competitor forces existing in the market carefully.

Michael Porter (1895) stated that there are five competition forces determining in the industrial sector:

1. Threat of newcomers.

2. Threat of substitute goods or services.

3. Bargaining power of supplier.

4. Bargaining power of buyer,

5. Competition among existing competitors.

To deal with the market situation in the industry, Porter also suggested some generic basic strategies.

For the industrial market with a wider target, it can be applied the following strategies:

1. Different products (product differentiation).

2. The advantages of cost (cost leadership).

3. Cost of focus (cost focus).

4. The difference in focus (focused differentiation).

Companies can launch a product that is different from other competitors by producing innovative products or at least no differences but more beneficial as compared to other competing products. Another strategy is to take advantage of the cost.

This cost advantage can result in lower production costs so that we can sell at a more competitive price.

Factors Affecting Employee Performance

A labor or employee will always be demanded to have good and high performance by the company. It is very reasonable because the company has high targets to be achieved, for example, maximum profit, satisfactory customer service, and maintaining the company existence. 

Many experts express about the factors affecting the performance of a person, including employees. Factors that affect performance according to Sutermeister (1999) consist of motivation, ability, knowledge, skills, education, experience, training, interests, personality attitudes, physical conditions and physiological needs, social needs and the needs of egoistic.

Mangkunagara (2002), for example, argued that there are two factors affecting performance achievement. 

The two factors are ability and motivation factors:

Ability of a person consists of the ability of potential (IQ) and the ability of reality. Reality ability is a merger between knowledge and skills. Based on these abilities, then --- in work context --- staffing must be in accordance with the expertise (The right man in the right place, the right man on the right job).

Motivation is formed of an employee attitude in a work situation that drives him directionally to achieve his work objectives in order to achieve organizational goals. For that, it is needed self-motivation that will encourage him to do an activity well to achieve good performance or work achievements. That's called a positive relationship between achievement motive and the achievement of performance as proposed by McClelland (in Mangkunagara, 2002).

Definition, Functions and Purposes of Compensation

The definition of compensation can be interpreted as remuneration given by employer to workers / employees, because these employees have donated the energy, thoughts and time to the business development.

Basically, all companies provide compensation to its employees aiming to appreciate and give a reward for what they have done to a company in the case of energy, time, and thought. 

Compensation is proven to be very effective because it can motivate employees achieving the best performance. 

Compensation functions are:

1. Allocating human resources efficiently

2. Using human resources effectively and efficiently

3. Encouraging stability and economic development

Compensation purposes are:

1. Meeting the economic needs or providing economic security for employees

2. Connecting income, contributions, and employee productivity

3. Connecting income and the company's financial success

4. Maintaining a balance and fairness in compensation to employees

Without mutual compensation between companies and employees, there is reduction of employee performance, the production that does not meet the target and not harmonious relationship between employers and employees.

Types of Compensation

There are some types of compensation that we know in the empowerment of human resources. Typically, giving these compensation types depends on each management. So, there is difference in compensation between one management and other management.

Mathis and Jackson (2002) divided the compensation into two types; intrinsic (internal) and extrinsic (external). Internal compensation includes praise earned for completing a project or successfully meeting some work purposes. They also said that the other psychological and social effects of compensation are also illustration of internal compensation.

External compensation is measured, has the monetary and non-monetary rewards. External compensation is divided into two types; direct compensation and indirect compensation; the direct compensation includes base salary and variable salary, while indirect compensation includes employee benefits.

Leap and Crino (1993) classified the types of compensation as follows:

1. Wages and salary, wage is a payment for work based on the time per hour or per day, while salary is a payment for the work by the week, month, or year.

2. Incentive programs are additional compensations beyond the salary or wages, incentive programs are in the form of bonuses or stock ownership of entity.

3. Employee benefit programs, these programs are given in the form of insurance, holiday allowance and pensions.

4. Perquisites, it is an income

Other types of compensation are health benefits, child allowance, wife or husband allowance, etc.

Definition and Purposes of Hospital Management

Definition of hospital management is the coordination among the various resources through the process of planning, organizing, and controlling ability to achieve goals.

Hospital management puetrposes are:

1. Preparing resources

2. Evaluating effectiveness

3. Governing the use of service

4. Efficiency

5. Quality

In complex organizational hospital activities, experience will not be enough, the treatment cannot base on guessing and taste only, this is caused by:

1. More difficult and expensive resources

2. Competition era that demands excellent service

3. The development of community demand

Professional management means implementing management in a manner that can be accountable scientifically; it requires a trained person correctly and properly. 

In order to implement patient-oriented services and maintain the quality of service, it is needed reliable management; everything that is needed will be available in the form of:

1. Right amount

2. On time

3. On the target

Management of hospital environment is a management that is not static but dynamic, so adaptation is needed if a change in the hospital happened, which includes resources, processes and hospital activities, also in case of change beyond the hospital, such as law and knowledge changes caused by technological developments.

The most important benefit that can be obtained when implementing management system of hospital environment is environment and public health protections. Hospital management specifications will provide an outline of environmental management designed for all aspects; operations, products, and services of the hospital integrated and interrelated