How Important is Financial Management?

Financial management is categorized as one of the sciences in the field of management relating to the activities of planning, checking, controlling, managing, and storing funds carried out by individuals, organizations, or companies. Whereas previously financial management was only concerned with the efficient use and allocation of funds, over time, financial management also included other activities, such as how to obtain funds, use of funds, and management of assets. Below is explained further about the importance of financial management which can be seen from the definition, function, the objectives of financial management.

In general, financial management conclusions can be drawn from the activities of companies or organizations related to how to obtain working capital funding, use these funds effectively, and manage assets owned to achieve the company’s goals.

In a company or organization, financial management has a number of functions, namely:

– Financial management can be used to prepare income and expenditure plans and other activities related to a certain period.

– Make detailed budgeting of funds, both in the income and expenditure sections.

– Financial management also functions like financial management. That way, the use of funds can run optimally in a variety of available ways.

– Financial storage, i.e. by collecting company funds and storing them safely.

– With financial management, companies can find and exploit existing sources of funds for the company’s operations.

– Financial control by evaluating and improving the financial condition of the company and the financial system in the company.

– Like a financial audit, by conducting an internal audit of the company’s finance. That way, there are no deviations and misuse of funds in the company.

– Financial management also functions to provide information about the company’s financial condition. Financial management can be used as material for evaluation and improvement.

If one day the company will be sold, the value can be set as high as possible. It is the duty of managers to suppress the flow of money in the company to avoid risks that could be detrimental to the company.

The scope of financial management includes:

– Funding decisions, which include management policies when looking for company funds.

– Investment decisions, usually the company’s investment policy for fixed assets. For example, buildings, tools, land, and others. Or it could be in the form of financial assets in the form of securities such as stocks and bonds.

– Asset management decisions is a policy to manage the assets owned by the company as efficiently as possible to achieve the company’s main objectives.

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