what is financial management

When we hear about “financial management”, we might get the impression of a well-put-together individual who has their assets in order and their budget under control.

While that’s part of the package, financial management goes much further than that with a career path that encompasses the economic life of both individuals and companies.

Financial management is everything related to the finances of a company from planning to maintenance. In a nutshell, it refers to the strategy of looking after the financial ecosystem such that a company is able to stay in the green, while planning for future growth and considering the budget needs for present and future.

Goals of the financial manager

In a broad sense, the goals of a financial manager is to ensure that the company has enough funds at any stage to maintain profitable growth and to ensure that all stakeholders are seeing returns on their investment in order to receive more investment possibilities. The financial manager should also ensure that funds are being used responsibly in a way that can lead to more revenue for the business. How efficiently money is being used by a company is the duty of the financial manager.

Other objectives in financial management are to draw up strategic financial plans in order to provide a blueprint for the allocation of funds going out of the business. This means carefully looking at the past trajectory of the revenue and considering how best to move forward with financial strategies in a calculated, clearly defined way.

In the initial stages, the financial point should decide on the amount of capital contribution needed for the business’ success. This involves considering what the company’s ideal financial infrastructure looks like, exploring what sort of assets will be purchased and when. A financial roadmap is crucial in identifying whether targets are being hit and where problems may need to be solved.

One of the fundamental components in financial management is ensuring that the company’s funds and assets remain secure.  This means ensuring that any investment the company makes is both safe and worthwhile with important aspects related to the funds. This could be anything from buying the right vehicle to employing the right staff members. to paying wages.

What are the functions of financial management?

There are several important purposes of financial management in a company and these come with their own set of tasks and responsibilities.

Research what capital is necessary

It is crucial to know how much capital is needed before launching a company. The estimation includes how much is needed for initial assets and set-up and forecasts how long it will take before the company needs to start earning revenue.

The financial manager is also involved in where the capital investment should go. The budget should be structured in such a way that the funds are used most efficiently.

Learning to do this correctly is vital in the success of the company as well as the financial manager’s career. Doing a short course in financial management is a great way to ensure you are researching the right way.

Choosing the best storage of funds

Money standing still is money lost. With inflation, it is important for money to consistently grow. This means that the financial manager should consider what the best method of storing the company’s financial assets with the intention of making more money. The ideal for this is an investment which will lead to passive profit.

Determining the source of funds

Especially when starting up, a company needs to find financial backing to maintain business operations. Choosing from where new funds come requires insight into the prospective investors as well as what is going to be required in the long-term future.

Different options for financial backing could be in the form of issuing shares for money, taking out loans, or taking out deposits such as bonds. The choice will depend on the financial roadmap as well as the business culture of the company.