Evaluating the efficacy with which the financial needs of an organization are met is a crucial part of any business experience. However, the opinions concerning the frequency of the said assessments may vary. Currently, it is believed that the first year requires monthly evaluations, whereas the next few years of performance will need an evaluation on a quarterly basis. The main reason for the specified statement is based on the need to check the presence of financial risks for a company in the first year as diligently as possible so that it could seize all opportunities and face as few risks as possible.
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Since a monthly assessment allows one to limit the extent of financial risk significantly, companies are advised to use monthly checkups in the first year of their performance as the most vulnerable one. As soon as the key processes are established and the main organizational routine is settled, the management of external risk becomes a less convoluted and challenging process, which allows minimizing the number of checkups to one per three months (Morgan, Robinson, Strachota, & Hough, 2017).
Moreover, the use of the quarterly budget implies that a financial manager should collect the data from a vast variety of sources, which may not yet exist or be available in the first year of a company’s operations in the target market. Therefore, the process of gathering data in the first year of functioning in a market will demand more frequent data collection. Furthermore, the use of the monthly assessment implies faster responses to emerging threats, which is vital for a company that is only starting to operate in the environment of its choice (Chandra, 2017). Overall, monthly assessments provide the security that a firm needs at first, yet they become far too time-consuming and less important in the following years of its performance.
Chandra, P. (2017). Finance sense. Tata McGraw-Hill Education.
Morgan, D., Robinson, K. S., Strachota, D., & Hough, J. A. (2017). Budgeting for local governments and communities. Routledge.