It’s an organization’s finance that meets the requirements of its business concerns. Simply put, it is the lifeline of a business organization. Every business must contain adequate finances to ensure the smooth running of its operations.
So, what is financial management? Financial management is the practice of managing a company’s finances in a way that allows the business to be both successful and compliant with the regulations. Let’s explore what exactly financial management means, its importance, and the main objectives and functions in this article.
What is financial management?
Financial management, at its core, is the practice of forming a business management plan and then ensuring that all departments stay on track. It’s in charge of efficient and effective planning and handling of the cycle of the flow of funds, that is, both inflow and outflow of funds. It’s the duty of a financial manager to maintain an appropriate magnitude of funds required for efficient operations, allocate financial resources to particular assets in a wise manner, and fundraise activities both short-term and long-term.
Importance of Financial Management
The role of financial management is critical in the growth of an organization. Financial management is important in the following ways:
Financial Planning
Financial management enables an organization to determine the financial requirement of the business and take business decisions accordingly. Financial planning is another crucial aspect of business concerns that helps in promoting an enterprise.
Acquisition of Funds
Financial management is always concerned with the acquisition of finance needed for the business. Acquiring the required funds play a vital role in the business’s financial management which involves a possible source of finance at minimum cost.
Proper Utilization of Funds
Financial management is all about wise allocation and proper utilisation of funds. When used accurately, this process can minimize the cost of capital, increase the firm’s value and strengthen the business’s overall financial position.
Objectives of Financial Management
Objectives are nothing but the goals or final aims of financial management for which you are making different kinds of decisions. Let’s find out what they are down below:
Be Aware of Availability of Funds
It is the primary objective of financial management as only a well-structured organization can take a business to its peak position. So, it’s critical to ensure all the availability of funds and plan for fund equalization from variable resources.
Optimum Utilization of Funds
The final motto of every organisation is to earn a profit. Earning more profit is not all about increasing sales and production. It can also be due to a reduction in cost and capital. The financial manager should utilize all funds ultimately.
Securing Funds Efficiently
This objective focuses on providing security to all the available funds. Ultimate utilization of funds and providing safety to those funds is an important responsibility of a financial manager.
Maintaining Records
Financial management helps in maintaining proper records of each and every transaction of a company related to monetary terms. It’s one of the provisions to provide safety to available funds and optimum utilisation of funds.
Functions of Financial Management
Functions are designed and derived based on the objectives of financial management. That is because an action cannot be implemented without a purpose. Functions are the duties performed by financial personnel and that involves:
- Controlling all the financial and investment decisions
- Acquisition of funds from all the available resources
- Proper management of liquid cash and cash-related activities
- Maintaining records of all money-related transactions
- Designing safety and security measures for all available funds
There are several finance certification courses available online that offer an in-depth understanding of financial management by thoroughly covering various subjects that deal with financial management. The content of such courses is designed to provide insights into the impact and importance of financial control in any business organization. Some of the many benefits of enrolling in these courses include:
- Financial understanding even for non-finance professionals
- Introduction to cost minimization methods
- Removal of guesswork and development of essential finance skills
