Finance Management

What is Financial Management for?

admin • 17 Sep 2023

The main objective of financial management is to keep a company's expenses balanced in relation to its revenue. The objective is for it to operate positively, that is, profitably.

This control is essential for companies to have good financial health and remain operational. Without efficient control, the company will probably not be able to remain open for long.

What Processes Are Involved in Financial Management?

As one of the main sectors of any company, finance ensures the management and division of available cash resources. But this distribution needs to occur in a planned and strategic way.

This is because, as you know, these resources are essential for the company to continue functioning normally. Therefore, it is fair to say that the financial sector is essential for any and all businesses to continue existing.

But what are the processes involved in financial management ? There are many of them, all different. A company can have several, depending on the market in which it operates, whether it is an industry or a distributor , among others.

One of the main processes is the management of accounts payable and receivable. It allows you to control the inflow and outflow of money. Without good detailing of this information, the company will have difficulty operating.

In addition, you also need to keep an eye on cash flow control . The idea is to understand how the company's balance is going, which makes it easier to create a plan for good use of working capital .

All financial management is aided by fundraising , another very important process for any business. This is because, without it, the company will not be able to raise the necessary amounts to be able to operate, especially at the beginning.

Finally, one of the most frequent processes is billing . It is through this that the issuance of invoices becomes possible. It also facilitates control of entries and exits, as well as contact with logistics.

Of course, each company will have specific processes, according to the activities it carries out. But it is still important to have a basis of which are the most common, facilitating budget management and improving financial health .

How Important is Financial Management for Companies?

There is no doubt that finances are one of the most important aspects of a business. And, in fact, financial management is fundamental when making decisions, providing paths to achieve goals and objectives.

For example: if your industry or distributor has larger funds, a portion can be used for investment purposes. Likewise, if the organization has funds less than the threshold amount, it is important to stop unnecessary spending.

To be more specific, it is not enough to understand what financial management is , you need to understand its importance for an organization.

Know that it helps the company to know where financial resources are used. This overview will help determine whether it will be possible to make any investment: what to spend, where and when to spend it, among other actions.

Financial management gives a better view of the organization's situation when it comes to money. This is because it acts as a kind of x-ray of all the processes and operations carried out.

11 objectives of financial management

Financial management aims to guide definitions involving financial resources such as investments and use of capital, for example.

It ensures that all bills are paid on time, as well as being essential in planning, organizing, directing and controlling the bank balance .

Discover 11 other purposes of financial management below :

1. Provides guidance on financial planning;
2. Assists in obtaining funds from different sources;
3. Helps you invest intelligently;
4. Increases organizational efficiency;
5. Reduces production delays;
6. Reduces financial costs;
7. Supports making the best financial decisions;
8. Prepare guidelines to obtain maximum profit with minimum cost;
9. Controls all financial aspects of the business;
10. Provides information through financial reports;
11. Encourages employees to save inputs and products.

What are the 4 Pillars of Financial Management?

The process of organizing corporate financial management has 4 pillars. Find out more about each of them!

To plan

Planning is the first pillar of financial management and serves to define the results to be achieved. Therefore, he must consider a series of factors, such as identifying investment opportunities and cost reduction.

In the planning phase, company management must both define goals for a given period and draw up plans for crisis control. So, having an emergency plan can define the fate of the business in these scenarios!

To control

Financial management control should not be confused with cash flow control, that is, the recording of what enters and leaves the company's account.

The latter is a process that is part of the strategy, but here we are talking specifically about controlling the execution of processes.

A good financial manager must ensure that all planned processes are running and, if not, understand what is hindering the flow. This way, it is possible to develop corrective actions and avoid future errors.

To analyze

For good decision making, it is essential to always analyze the data and results. Therefore, the best thing to do is find points for improvement, reduce costs and understand what type of action brings the most favorable results.

Invest

It is important that all investments made by the company are decided based on the previous pillar. This indicates that you must carry out a thorough analysis of the data available about the business.

This is how it is possible to choose investments that bring results that contribute to the company's financial health. They also usually have a level of risk that the organization is willing to deal with.

In financial management , any investment must be seen as a strategic decision. In addition, also consider purely financial data, information about hiring, growth, acquisitions, purchases, inventory, among others.