What is Financial Management?

In a true sense Financial Management is an art of maintaining a positive balance between the cost of sourcing the funds and the return on the deployment of those funds. Let us explore the world of Better Financial Management >>

What is Financial Management?

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.

What are the objectives of Financial Management?

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.

What is the process of Financial Management?

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.
  • Financial Control.
  • Financial Decision Making.

What is Financial Planning?

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.

What is Financial Control?

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? 
The purpose of Financial Control is to see that the asset is being used optimally and giving desired returns. And it is better to dispose off the asset if it is not yielding adequate returns.

What is Financial Decision Making?

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.
Let us end with the following quote of Billy Graham:

“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.”