In simple words financial management is handling the monetary resources effectively. This is necessary at both individual and organizational levels. When it comes to a company, financial management plays a very important role as this greatly decides the profit and the development of the company. Financial management essentially involves two stages: financial planning and financial control. In the former stage, the available resources at hand are analyzed and their value is computed. Plan is drawn accordingly and the time and amount of the resources that need to be used for carrying out a specific task is set. Here the resources directly reflect the expenditures associated with them. Financial control lies in improving the cash flow of the company.
While financial planning involves a deeper study and analysis of the resources by technical experts, financial control can be exercised only by the some who adopt tested successful strategies. The inflow and outflow of money needs to be checked and these have to be compared with the budget so as to evaluate the performance of the company on the basis of finance. Managing company finance basically deals with attaining the set goals at the set time. Any company has quite a number of investors. Company finance management can be claimed as effective only if the investors walk home with good returns on their money. Thus managing finance is more about handling the investment and the returns proportionately.
In order for the company financial management to be effective, the following should definitely be done and more the perfection involved in the following tasks, more efficient the management is. All the financial reports need to be checked. These include statements of profit and loss, balance sheets, cash flow, etc. It has to be seen that sufficient amount of capital is being allocated for all the operations of the company. If finance is directed in excess for the development stage and in deficit for the scratch, no doubt it is inefficient management ending up in unsuccessful results. The revenue of the company has to be studied and the budget planning needs to be done accordingly. Forecasting the costs involved in obtaining the set goals and reviewing the net expenditures for the same after the completion of the project is very much necessary to analyze and improve the financial management of the company.
The company’s success alone doesn’t dictate effective financial management. Certain factors like profit per employee also contribute significantly. If there is any funding option that the company can rely on, it needs to be evaluated and made the best use of. If there is doubt on going ahead with an investment, critical financial decision making techniques are to be applied. Effective implementation of all these constitute management of company finance.