Financial Management
- Posted on August 24, 2022
- Financial Terms
- By Glory
One of the essential requirements for starting any
business is financing. Throughout a company's existence and even after it is
liquidated or acquired up, a significant amount of funds and effective
financial management are needed. Thus, at every stage of the business
lifecycle, finances must be managed, regulated in accordance with regulations,
and monitored.
What
is financial management?
Financial management is the process of applying
general management principles to an organization's financial assets. Finances
must be properly managed to provide quality and consistent maintenance for
effective operation. An organization will encounter obstacles if finances are
not managed properly, which could have a negative impact on its development and
progress.
Financial management is fundamentally the process of
creating a business plan and ensuring that it is followed by all departments. A
long-term vision may be created with the help of data that the CFO or VP of
finance can supply. This data also helps with investment decisions and provides
information on how to finance those investments as well as liquidity, profitability,
cash runway, and other factors.
Financial management, to put it simply, is the area of
business that deals with allocating the available funds so as to maximize
business profitability and return on investment (ROI). They concentrate on
finding the funds, whether it comes from the entrepreneur's initial investment,
loan financing, venture capital, public offering, etc.
Businesses with stronger financial management
experience explosive growth, whereas those with poorer financial management
typically suffer losses or produce lesser earnings.
Companies use financial management sets the
goals, creates the policies, specifies the processes, puts programs into place,
and allots the budgets for all financial dealings. It is the best method for
regulating an organization's financial activities, including money-related
purchases, expenditures, accounting, payments, risk analysis, and everything
else.
People and businesses have a variety of
alternatives for managing personal or corporate finances, respectively.
They could either manage them on their own, hire a full-time
employee, hire a part-time accountant, or hire a third party to
handle all financial-related tasks, like a Chartered Accountant.
The majority of the time, businesses have a specific
department that handles all of their financial concerns. Within an
organization, a finance manager is in charge of handling finances and managing
its resources. At this role, decisions pertaining to finances are made. The
finance department may have different titles to meet the different needs of the
business depending on the company's characteristics.
Importance
of financial management
An organization's financial management sets the goals,
creates the policies, specifies the processes, puts programs into place, and
allots the budgets for all financial activities. It is feasible to guarantee
that the business will always have access to enough cash through efficient
financial management procedures. Financial management;
- ·
aids businesses with their financial
planning;
- ·
aids organizations with planning and
raising money;
- ·
aids organizations in using and allocating
monies acquired or received effectively;
- ·
aids organizations in crucial financial
decision-making;
- ·
aids in increasing an organization's
profitability;
- ·
increases the organizations' or
businesses' overall value;
- ·
economic stability is provided;
- ·
promotes employees' financial saving,
which aids in their personal financial planning.
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