The Definition, Functions and Objectives of Financial Management

Financial management in a company is needed for a very strong foundation. Company finances also have a very risky nature. If finances are not managed with a good system, it will become messy and will certainly result in the cessation of the development of a company.

In a company, of course, there is a need for an independent field that is responsible for all finances. Well, this field is what is called financial management in management journals . Financial management can be defined as the overall planning, storage, management, and control of assets and funds owned by a company. The financial management system must be well planned and mature so that serious problems do not arise in the future.

Various Financial Management Functions

1. Investment Fund

A financial manager in the company must be able to ensure that the amount of funds available for business activities is actually used optimally in order to grow the company’s business. Costs incurred to obtain funds and the value of return must always be compared and must be balanced.

In addition, financial managers must also be able to see which lines of business can generate higher returns. Also must be able to improve business lines when performance is decreasing.

2. Financial Planning

The financial manager also has the responsibility of planning and forecasting the company’s business financial needs. The financial manager is expected to be able to provide precise details regarding the amount of funds that will be needed to purchase a number of assets for the company.

Company management through financial managers must know what must be spent as working capital and fixed assets for business continuity. In addition, another important task of the financial manager is to plan the funds needed by the company in the future. The responsibility of the financial manager is also related to designing what kind of business line the company will develop, realize, or even dismiss.

3. Determination of Capital Composition

If the planning and forecasting of business funds has been made by the financial manager, the capital structure must be decided immediately. In this case, there will be a mixture of debt and equity which is used as a profitable investment opportunity cost in the company’s future. Well, this is what is called the capital composition structure in management journals .

4. Financial Control

The purpose of financial control is an analysis of the actual results of the company, then approached using quite different perspectives at different times. Furthermore, it is compared again with the short, medium and long term goals of the business plan that has been made by the company.

5. Maintain Liquidity

In a management journal , cash is the best source that is useful for maintaining liquidity. A business or business certainly requires paying employee salaries, buying raw materials, and handling other company financial needs. However, a financial manager must be able to determine and decide whether there is a demand for liquid assets. In addition, the financial manager is also tasked with managing these assets in such a way that the business does not experience a shortage of funds.

6. Surplus Management

The company surplus is certainly very profitable. Selling surplus assets and investing in productive ways will certainly increase profitability. This will also increase the ROCE.

Financial Manager Functions

1. Controlling

Controlling is an activity to evaluate or control the company’s ongoing finances. The evaluation or control that is carried out aims to improve the company’s financial system so that the company can survive.

2. Planning

The financial manager has the role of planning company finances. The reason is, planning is very important for the sustainability of a company. Company financial planning can include managing cash, calculating profit and loss, and planning the right cash flow.

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3. Budgeting

The definition of budgeting is the activity of allocating company funds for various purposes of the company’s business activities. Allocation of funds must be made to a minimum and maximize the budget owned by the company.

4. Reporting

Reporting is defined as financial reporting activities. Company financial reporting activities must be carried out transparently or openly in all sectors or circles of the company. This financial report is very functional to provide accurate information about the actual financial condition of the company.

5. Auditing

Auditing is an activity or process for conducting corporate financial audits. The financial audit of the company must be carried out in accordance with correct accounting principles. The aim is to avoid the occurrence of deviation or misappropriation of company funds.

Financial Management Objectives

1. Corporate Finance Mobilization

The collection of a number of funds used to carry out business activities is also a core part of the company’s financial management system. This really needs to be handled by a financial manager appropriately.

If a manager has made a conclusion regarding the estimation of the amount of funds required to carry out a business process, the required amount of funds can be requested from any legal source. For example, stocks, bonds, or bank loan requests. However, the essence of all this is that there must be a proper balance between company money and the amount of funds borrowed.

2. Maximization of Profits

The reason it is important for companies to hire a financial manager is to maximize company profits while managing the company’s financial system. Company profits can be obtained both in the short term and in the long term. However, the main focus of this goal is that every individual or department in charge of dealing with financial matters must ensure that the company will generate a profit or profit that is sufficiently expected.

3. Lowering Capital Costs

The role of the financial manager is very important for a company. Financial managers do the best ways to reduce the company’s capital costs. Where capital is very vital for a business or company. Based on management journals , the financial manager will ensure that money borrowed from other parties only attracts a small interest rate, so that later the company can maximize revenue or profits.

4. Going Concern

It cannot be denied that the survival of the company is very important. This is the reason that management should consider hiring the best financial manager services from the start. Company managers must be able to make loose financial decisions to ensure the company’s business is successful.

5. Correct Coordination

In a company, there must be a corporation and understanding that is in line from one department to another. The finance department must also understand and approve various decisions of other departments in a company so that the business can function and run smoothly.

Based on the management journal , financial management does have a very important role in a company. It is like a business lifeline. Financial management is a vital activity that must be carried out in any organization, including companies.

It can also be said that the use of business funds is very important. This is the reason why the financial management system can affect various other departments in the company. Therefore, this department must be handled properly.

Also read: What are the impacts of gambling? Check it out!

Staff DC

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