What is Financial management?
To plan, organize, direct, and control a company’s or institution’s financial activities is to practice financial management. In addition to playing a crucial role in fiscal management, this field also involves applying management concepts to an organization’s financial assets. Know more about financial management.
Financial management aims towards a variety of outcomes, including but not limited to:
- Provisioning the organization with a steady flow of cash;
- ensuring a healthy profit for the company’s owners;
- spending money wisely and effectively;
- Generating genuine and secure investment possibilities.
The responsibilities of the financial manager
Finding out how much money is needed. The CFO is responsible for estimating the business’s capital needs. The company’s anticipated expenditures and profitability rules will determine the appropriate action. Estimating the necessary sum should boost the company’s profits.
Capital structure development
An appropriate capital structure must be established when the required capital amount has been determined. This calls for a look at the debt-equity ratio throughout the short and long term. The perspective of the structure is determined by the current capital stock and the amount that must be raised from external sources.
Spending or putting money into something
Organizations of all types must invest funds to expand their operations and generate consistent profits. This implies that the CFO has to make secure and lucrative investments.
Distribution of earnings
A company’s finance manager is responsible for making the most of its profits after they have been earned. Some of the net profit might be set aside for future safety, growth, and innovation investments, while the remainder could be distributed as dividends to the company’s shareholders.
Good fiscal discipline
The finance manager’s other primary duty is the prudent management of the business’s funds. Payroll and other employee benefits, rent and utilities, stock and bond payments, legal obligations, and the procurement of supplies and equipment all need cash flow.
Management of one’s financial resources
The financial manager’s responsibilities include budgeting, saving, raising capital, monitoring, reporting, and interpreting the company’s financial data. Financial methods, including budgeting, ratio analysis, risk management, and cost and revenue planning, may help.
Why is it crucial to have good financial management?
There are several reasons why this kind of management is crucial.
- assists with budgeting and raising money for organizations;
- It helps organizations make the most of the resources they have;
- help businesses with their tough financial choices;
- Boosts a company’s bottom line;
- boosts businesses’ worth in general;
- Gives them a sense of security in their finances.