Financial Management is the management of the finances of a business. Every business organization sells their products and services to generate revenue. In the whole process of generating revenue they also have to incur expenses. A business organization may also borrow money from a bank or a financial institution towards investment and working capital. Therefore, in the whole process of the business management there is an incoming money and outgoing money. The function of a Financial Manager is to manage these finances effectively and efficiently.
The three key objectives of Financial Management are:
- To generate Cash Flow.
- To create wealth for the organization.
- To provide promised returns (ROI) to investors.
The whole process of Financial Management involves the receipt of money, use of money, saving of money, and investment of money. There are three key elements to the process of Financial Management. And these are:
Financial Planning is to effectively use the finances of the organization. The purpose of Financial Planning is to use the money in resources that generate revenue. Let the financial planning be done for short-term goals, medium-term goals, and long-term goals.
Financial Control is to ensure effective control on the assets and processes that used in generating revenue. Ask these questions everyday in the process of Financial Control :
- Is the asset being used optimally?
- Is the asset giving the desired returns?
- Is the asset properly secured?
- Is the asset adequately insured?
Financial Decision Making is to take right financial decisions at the right time.
The whole purpose of Financial Management is to ensure:
- Better Financial Planning.
- Better Financial Control.
- Better Financial Decision Making.
“The time has come for all evangelists to practice full financial disclosure. The world is watching how we walk and how we talk. We must have the highest standards of morality, ethics and integrity if we are to continue to have influence.”