Financial management is the subject for management of finances of a business organization to achieve various financial objectives. Financial management means to acquire and to use various funds in an organization or even at your home. It is the process through which you put your numbers to work in order to make your business or your money work more successfully. A good financial management system will help you know how and why your business is doing great financially.
Its key objectives are:
- To create wealth
- To create cash
- To provide a good return on investment
If you are looking to take up financial management as a subject for further studies, there are many financial management books available in the market. These begin with ‘Basic Financial Management' by M.Y. Jain & P. K. Khan, to various other Financial Management Books by Khan and Jain. Financial management allows an organization to compare its position against other companies within the industry.
The well-known financial management books are :
- Cost Accounting & Financial Management – Khan
- Basic Fin Management – Khan & Jain
- Financial Management – Chandra
- Fund of Financial Management – Chandra
- Theory & Problems in Financial Management – Khan & Jain
- Financial Management – M.Y Khan, P.K Jain
- Financial Management Theory & Practice 8/E – Prasanna Chandra
Financial management as a subject interests many, from students who want to take it as a subject to major in, to housewives or single working mothers who want to sort out her finances and seek ways of getting wealthy. To know to invest right, to learn various rules and understand the complexities in the area of finance, you can refer to many beginner books available on financial management.
Financial management has various objectives
- To ensure that there is regular flow of funds in the enterprise.
- To see that there is optimum utilization of the available funds
- To ensure there is adequate return
- To ensure safety on investment
- To plan a sound and fair composition of capital to maintain a proper balance between equity and debt When financially things are more stable, it allows you to manage things on a macro as well as a micro level.
To manage things proactively, rather than reactively
To provide financial planning information for investors
To make operations more profitable
To avoid investing too much money in fixed assets
To maintain shortterm capital working needs
To set sales goals
Financial Management
Many people would expect starting a business to be very easy. With a product or service to sell and enough knowledge to market it properly, many people think that they are ready to go. Starting a business, however, takes more than just products or services and simple knowledge. It takes much more if you want to make your business grow.
At the very start of the business, owners or shareholders will instantly be faced with financial matters that require financial decisions. Questions such as what assets to invest in and where to get the cash needed for such investments would require financial know-how. And as the business venture thrives, shareholders have to manage daily finances and make long-term financial decisions. All of this definitely requires more than just a little knowledge in business. It requires knowledge in an entirely different area - the area of financial management.
Defined, financial management is the process of planning financial decisions with the ultimate goal of maximizing the stockholders' wealth. In the world of finance, financial management is also known by other names like corporate finance, business finance, and managerial finance.
While the ultimate goal of financial management is clear "maximizing stockholder's wealth," the path leading to this ultimate goal is paved with other small goals. Goals like day-to-day profitability and properly managing daily finances are generally regarded as short-term goals, and achieving these goals belongs to the realm of short-term financial management. Aside from these, financial management also tackles other long-term goals, including business profitability and viability.
Achieving the goals of financial management, both long term and short term, involves a lot of processes and activities. These usually include cash management, financial risk management, financial accounting, managerial accounting, and others.
Now, these may sound like a multitude of tasks, especially for businessmen who are only managing small businesses. With the many financial management software products available, however, handling all of these tasks may become easier. Alternatively, businessmen may avail themselves of the services of a financial manager or seek the aid of companies providing financial management services.
Financial Management
When people think about starting a business they tend to forget the importance of financial management. A majority of the time it is ignored because the business owner is not exactly sure how to keep financial records. In a business that has no future plans for growth or expansion can get away with overlooking financial management, however most businesses plan to grow. Thus, not having good financial management for your business will be a downfall and possibly end your endeavor altogether.
Where Did You Get It And Where Did It Go?
In order to handle the finances of your business you will want to gain some accounting skills, if you do not want to do that you should get an accountant. This will allow you to keep track of what has happened with your money.
As long as you have an accounting system that can correctly review financial reports, the future of your finances will be in better focus. You will be able to establish where a majority of your income is coming from and how much your expenses are costing you.
What Is Your Financial Health?
Calculating the financial ratios of your business will show you how healthy your business finances are. You will also be able to compare your company with competition to see where you stand in the industry. While financial ratios are not absolute, they can help you see where you are succeeding and where improvement is needed. If you see any numbers that are not aligned, you can do some research to see how to manage expenditures and increase your income.
Is There A Pattern
When you evaluate your finances you will also be able to see if there is a pattern. You will be able to keep track of sales trends, like what time of year your sales are most prominent and you will be prepared to have enough stock or time depending on the nature of your business. You will also be able to get a grasp on your expenditures, as well as be able to notice if there is an overspending issue before it is too late. In return, issues such as theft or embezzlement will be detectable before your business suffers a massive loss or legal issues.
Plan For The Future
The future of your business is unpredictable, but it is likely you will have good patches and not so good patches. Even if your business is booming, if you are not prepared for the sudden growth, you can suffer and lose quite a bit. Growth of a business is a great thing, however it can be sudden. Thus having capital to accommodate the growth will help you keep up with it.
Many people do not realize that financial planning isn’t just evaluating numbers. It is a way to determine how well or poor your business is doing. You will also be able to manage for future growth or declines so you can remain stable and stay in business.
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Author gohar
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For additional information: Learn more about financial management from Mark McCool at http://markmccool.com/Meet_Mark_McCool/Bio.html.