Financial management is very important in any business. The reason being that, it is to maximize the wealth of owners. All businesses aim to maximize their profits, minimize their expenses and maximize their market share. There are four recognized element of financial management. These are; planning, controlling, organizing and directing and decision making. The four divisions are based on the purpose of each task.
Financial management itself involves understanding and properly controlling, allocating and obtaining a company’s assets and liabilities, including monitoring operational financing items like expenditures, revenues, accounts receivable and payable, cash flow and profitability. The three types of financial management decisions are capital budgeting, capital structure and working capital management. A business transaction that would include capital budgeting is if your company should open another store or not. The primary objectives of financial management are; attempting to reduce cost of finance. Ensuring sufficient availability of funds. Also, dealing with the planning, organizing and controlling of financial activities like the procurement and utilization of funds.
In managing your business finances, the day to day operations of the business and keeping within budget much be ensured. It also includes making long term investment in equipment and obtaining the financing for your operations. Normally financial managers are responsible for financial health of an organization. They produce financial reports, direct investment activities and develop strategies and plans for long term financial goals of their organization. Financial managers typically help management make financial decisions.
Financial management is an important skill for every small business owner or manager. Managing your finances means that one must plan to pay its taxes on a timely basis. Every decision that an owner makes has a financial impact on the company, and he has to make these decisions within the total context of the company’s operations.
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