Peter Drucker was a famous management guru who wrote over 50 books on management. At one time he was considered the most influential business thinker in the US.

Drucker felt that everyone was responsible for financial management. He felt that the accounting department was responsible for preparing the basic expense information, but each and everyone was responsible for financial management.

Today we know that financial management is best done through process management.

Traditional cost accounting focuses on department expenses. When employees are thinking about their business day, how many employees do you know that think:

• wages

• benefits

• office supplies

• phone expense

• computer expense

• .

• .

Employees think about the processes they perform. They think:

• process payroll

• hire employees

• upgrade computer software

• Purchase office supplies

• Make sales calls

Financial Management based on processes simply takes the expenses that various departments incur and assigns those expenses to the processes they perform.

Just like other parts of our lives, once we know how much various processes costs we can make decisions about how to best  spend our money. Think of yourself, would you rather:

• take a vacation for $1,000 or go out to dinner 20 times @$50/going out?

• drive expensive car or live in larger home

Likewise, once organizations know how much their processes costs they can decide how to improve them:

So personally you might improve your dining out experience by:

• checking restaurant reviews

• checking menu prices

• checking out early bird specials

• barbeque

• buying prepared food from restaurant

• learning how to cook healthier

Once an organization knows how much it costs to prepare a budget, it can likewise explore some alternatives

• discontinue the budget

• budget with less expense detail

• budget quarterly instead of monthly

• prepare quarterly forecasts instead of monthly budgets

Each must strive to obtain low cost:

• in relationship to their type of product or service
• by eliminating waste

The best organizations get everyone involved with financial management. They may not call it financial management, but they do get people involved. If an airline knows how much it costs to get baggage sent to wrong city to proper person, they can educate their baggage handlers. Once the baggage handler under this cost, they are more likely to see the impact of their mistakes on the airline.