Financial management refers to all or any of the functions and aspects of the financial components of an organization or for a personal. This includes, but isn’t limited to, the design, managing, controlling, and evaluating of the finances and economic structure for a client.
The financial management of an organization requires generating a technique to confirm that an organization maintains positive growth in its finances so as to maximize profit and minimize costs.
What are the goals of economic management?
One of the key goals in financial management is to create certain that the client is in a very financial state specified there’ll be more funds coming in than going out.
The goals of economic management may be two-fold related to:
– the corporate
– The stakeholder
When it involves the corporate, the most goal of economic management is to organize an idea for a way the funds are spent so as to determine the financial assets of the corporate returned both quickly and quite once they left. In short, the financial manager should draw up a blueprint which is {able to} be able to see the revenue grown quickly, but sustainably.
For the stakeholder, the financial manager should be ready to show how the company’s money is getting used so their investment is proving worthwhile which their profits will are available in with time. The financial manager should even be ready to communicate any financial plans with the stakeholders in a very clear and concise manner, so they’re well informed of future plans.
Key objectives in financial management
As the principal goal in financial management revolves around growing revenue and creating ways to maximize costs, it isn’t surprising that the foremost objectives of a financial manager are supported that fundamental idea. The financial manager is in command of putting plans in place to make sure the goals are met. This includes all phases of strategizing, planning, evaluating, monitoring the company’s finances.
Plan and project goals clearly
drawing up a strategic plan helps put the right processes in place before moving forward. This helps to define where and why certain funds are allocated and once they must and should be spent or moved. Planning a roadmap makes it easy to gauge and track the direction of the money and whether the strategy is functioning obviously or whether the plan should be changed and modified.
Organize financial assets
In order to best consider and monitor the company’s finances, there should be clear, easy-to-see methods of tracking and organizing the movement of the funds. This may look different for businesses and individual clients.
For a business, it is vital to record all relevant information in clear systems which can be looked over by management and add up. Should it’s a necessity, the organization of the financial assets should even be able to controlled by another financial manager or team member.
For a private client, all processes of investment and financial storage should be explained in clear terms with no jargon or slang that the client can understand. This includes communicating all aspects related to the client’s financial ecosystem like retirement and health plans, credit or cheque systems, and any insurance that will be advised or necessary.
In order to efficiently organize the assets for both businesses and individuals, the financial manager should profit of any software and technology.
Grow revenue passively
One of the best ways for a company to form revenue is to earn it passively. If a financial manager can find the right investments, then half their job is completed without even trying. With a good investment strategy, a company’s money can grow exponentially over years without having to feature from now on investments. The financial manager is in command of finding the best because of growing their client’s profits passively.
Communicate with clarity
Not all individuals are aware of the assorted phrases and terminology in commerce and finance. When talking with clients and stakeholders, it is vital to clarify in simple, easy terms so there’s absolutely understanding.
It should be one all told the objectives to talk frequently, breaking down any important steps or movements with clients and stakeholders on a day to day, like monthly and quarterly.
The importance of economic management
The backbone of any company is its finances. this means that that focus on growing the finances is very important for achievement. Beyond the fundamental necessity of getting good financial stability, financial management has important features in building a beautiful business.
Helps with financial planning
Any expert execution comes from inspiration in place. With a budget in place, the financial trajectory of the business is straightforward to work out. If things are of course, the financial manager is visiting be able to identify problem areas and set things straight to urge the direction back on course.
Plans for the acquisition of funds
Companies, especially startup ones, require capital to drive operations forward. The capital contribution can come from type of various locations. it’s up to the financial manager to line up strategies to advise on where to both source and place the funds that are available for the business to use.
Allocates funds in effective ways
For the business to run within the most effective and most sustainable way, the funds coming in must be used effectively. The financial manager plays an important role in helping management allocate where the funds go. as an example, if the company has just received an oversized investment sum, then those funds should go towards an integral component of the business’ functions in preparation for building and maximizing profit.
Encourages good money planning methods
Teaching staff, important lessons are nice for both the individual and thus the business overall. The financial management can influence team members in an exceedingly company to be better with their – and thus the company’s – money which ends in an exceedingly saving-savvy environment. Cutting losses in an exceedingly general sense benefit the business in an exceedingly major way.
Ensures financial stability
Once the finances of a company are on a stable path, it doesn’t suggest the work is completed for the financial manager in any respect. Maintaining the positive financial stability is one all told the foremost important components in financial management.
Financial management functions
Estimate capital requirements
It is crucial to understand what proportion is important to urge started or to keep up a company’s operations. this can be why the method of estimating the capital requirements for an organization is one among the foremost important roles that a financial manager undertakes. what proportion are needed certainly periods of your time may be a vital consideration because it gives an inspiration of how long the corporate has before new funds or investments are needed.
Source fund acquisitions
Since there are alternative ways to achieve finances for capital, it’s important to think about which is that the best long and short-term approach to require. the most ways to accumulate financial assets are:
Through issuing shares and debentures,
Taking loans from banks or financial institutions, and
By drawing public deposits like within the sort of bonds.
While one option may well be perfect for one business, it’d be entirely unsuitable for one more. The financial manager is chargeable for considering the various approaches and suggesting the most effective method of acquiring the financial assets needed.
Investing the financial assets
This function of economic management is significant to the method of passively growing a company’s funds. almost like capital acquisition, investment options are numerous and it’s up to the financial manager to seek out the most effective, most fitted ones in order that profits can grow without fixing much effort.
Scope of economic management
The scope of economic management may be variable into three main factors:
Financial decisions
As one of the first functions of economic management, making the choice of a way to source funds may be a major think about the scope of the industry. The financial decisions are important at any juncture in a very company’s life, but this can be very true within the initial stages of starting out. Decisions with regards to capital and fund acquisition can make or break a startup, so taking them seriously and doing sufficient research is paramount.
In a business, there are two different sources which will be wont to raise funds:
Longer-term sources like capital structure, and
Shorter-term sources like capital.
Financial investment decisions
As the third key think about the functions of economic management, finding the correct financial investment option for an organization may be a main a part of the scope too. this could be dampened into short and long-term options:
Long-term investment includes making decisions which sees the financial assets of an organization pledged for long periods of your time. Often, this comes within the sort of fixed assets, like equipment or land. These investments are necessary for the business to control, but don’t directly impact cash-flow.
Short-term investment includes making the choices to work out the financial assets of an organization pledged for a brief amount of your time. This, unlike long-term investment, directly affects the cash-flow and liquidity of the corporate.
Dividends decisions
Dividends refers to the quantity of profit to be distributed. this can be a very important a part of financial management because decisions must be made regarding how and when that profit is allocated. this can be not always easy because shareholders and managers might want various things for his or her claim. Shareholders might want to assert their dividends for private use, while managers might prefer the profits to stay within the company so as to satisfy the on-going needs.
This decision involves the financial manager who can help to seek out a compromise in order that both parties are proud of how the profits are split.
Financial management salary expectations
The average salary for this position in South Africa is R 543 713 each year.
Financial managers can expect to earn the subsequent in step with their occupational level:
| Occupational level | Average annual income |
| Entry level | R385,719 |
| Mid-career professional | R583,041 |
| Top-end professional | R623,113 |
A bonus remuneration within this field varies in step with your experience and ranges from R25,000 – R50,000.
What skills are needed in financial management
An analytic mind
The analysis may be a huge part of financial management, from considering what methods work to spot what techniques must change. Financial management requires constant evaluation and, as a result, analysis may be a skill necessary for the work.
Clear communication
One of the mandatory skills in financial management comes from the importance of providing key information to management and stakeholders.
Eager to learn
In any field, it’s important to constantly learn new tricks of the trade. Financial management isn’t any different and also the ability to find out is a very important skill within the industry. this suggests constantly reading new material, finding new techniques, and exploring new methods is included in financial management. Taking a financial management short course may be a good way to achieve a new understanding.