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What are the basics of financial management?

basics of financial management

Financial management can be both a broad and all-encompassing term. It refers to the fundamentals of managing any and all finances, funds, and assets for a company or individual.

There are intricate details involved with different areas of financial management, but most career paths or job positions follow the similar basics.

The basic objectives of financial management

Organise finances

If you can develop a system in which finances are organised, tracked, monitored effectively, then half of your battle is won. For a business, it means finding efficient ways to record and store financial information in a clear system. For an individual client, this includes walking and talking through everything from considering which way to pay in certain situations, such as with credit card or cheque, to retirement plans and mortgages.

The process also involves researching software to help organise assets. The right tools in place can be a game changer in financial management.

Finding ways to earn passively

Some like to put their money where their mouth is. Financial managers think putting your money away so that it can grow is much more important. With the right investment plans, money can age in a way that its grows exponentially. Advising your client to save a little bit can be the best way to help them profit from their own money.

This includes taking risks on investments. High risk can equal high reward, so finding the most careful way to take chances can be very worthwhile. Understanding your client’s portfolio will help determine what sort of investments they should be looking into.

Constantly research and learn

By taking a short course, you can gain new insights into tricks, tools, and techniques which can take your financial managing to the next level. Reading about the world’s economy is a vital component in being an excellent financial manager. In finance, doing the theoretical work is just as important as implementing practical strategies.

Communicate clearly

Although most of your clients won’t know all of the terminology and financial vocabulary of the economic strategies you implement, it is still important to break down the details of what you want to do with their money. This is especially pertinent with big-firm clients where knowledge of the financial stability is key to the company’s success. Communication should be regular, with details shared every month, quarter, and year.

Financial management goals to mitigate losses

While making money work for you is one of the fundamental blocks of financial management, finding a way to save money is another. Looking to mitigate unnecessary risks which could become expensive is crucial.

Look to cut out debt

Interest can be a blessing or a burden. If you are able to assist your client such that their finances are always in the green, they will be able to enjoy the favourable side of interest. There are some occasions where spending money is simply not enough to allow profit, such as when buying necessary fixed assets, so it is important to create strategies which allow the repayments to happen as quickly as possible so that the interest doesn’t add up.

Expect the unexpected

And if you can’t predict it, at least plan for it. While your clients might be experts at planning, there are always unforeseen circumstances which will require funding. Having the right insurance in place can save against having to plunge deep into savings or into finances which were dedicated elsewhere. As a financial manager, it is up to you to explain how to insure your customers against plummeting funds from emergencies. In finance, security is key, whether in the present or for the future economy.

The goals of financial management

Purpose of financial management

Financial management is one of the most important components in building and sustaining a business. If a company is not able to keep their funds and assets in order and up to date, it can be detrimental to its success.

What is financial management?

Before looking at what the purpose of financial management is, it’s worthwhile knowing exactly what is involved in the industry.

A financial manager takes on all responsibilities related to the financial endeavours of a company. This includes all steps from planning and investment options to strategic budgeting and continuity. Financial management is essentially the control of the financial component making up a business with the intention of making as big a profit as possible, while spending the least possible amount.

What are the basic objectives in financial management?

Looking after the financial ecosystem in a company is a major undertaking with many important tasks and processes involved. Often there is an entire department dedicated to looking after the funds and assets in a business, which means having the ability to work as a team is just as important as being able to crunch numbers.


Anyone in any field of management knows that “failing to plan is planning to fail”.

The process of drawing up strategies before committing financial assets is crucial in business so that money is not squandered.

If a proposed cash-flow plan is in place, it makes planning for present and future development easier. This means any budgeting is already set-up, which ensures that money is allocated before it leaves the business, which helps to alleviate problems of debt.

Financial planning also includes sourcing funds, such as holding investment rounds or taking out any loans, which can then be used to grow the business with the intention of producing enough revenue to either pay back loans or turn profit to develop the business further.

Storing the funds is a long-term part of financial planning. The ideal plan to store assets is one which involves earning, such as investing funds which passively grows.

Communicate information

One of the major responsibilities in financial management is breaking down and communicating relevant and important information to internal and external stakeholders. The pertinent information should be shared every month, quarter and year. This helps to ensure that the accountants are provided with the correct information on time. Regular updates also provides investors with information showing the financial performance of the business.

Risk management

“High-risk, high-reward” means that a financial manager has the possibility of making or breaking a business’ financial state. Putting funds in a low-risk investment means that there is more of a guarantee of making back money, but the profit might not necessarily be a large sum. Using a high-risk investment strategy can yield a lot more money, but also might mean losing out if things turn south. The financial manager holds the key to discovering which sort of investment is suitable for an individual or a company.

As well as being able to manage the risk of a company in terms of asset investment, the financial manager also is responsible for risk mitigation. Being able to put methods in place to reduce risky activity, such as fraud or embezzlement, is key to prevent financial accidents which could leave to failure. Having insurance schemes can ensure that the business will survive should anything bad happen. It’s up to the financial manager to know which ones are well suited for the company.

Eager to learn

Finding new ways to complete tasks is an important aspect in any sort of managerial position. With new strategies emerging and technology constantly evolving, it’s highly recommended to stay updated with improved systems and techniques to manage a company’s finances efficiently. Taking a short course in financial management is one way of gaining theoretical insight which can then be applied practically.

What is financial management?

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.