What is Financial Management? #

Finance is the lifeblood of every business. In order for money to generate money and bring more profit, effective financial management skills are one of the most important skills for CEOs.

Financial management refers to planning, organizing, directing and controlling the financial performance of a business.

Furthermore, it is concerned with the application of management principles to the finances of an organization according to the general principles and specific regulations of each country in the management of corporate finance.

The importance of financial management in business #

Without a doubt, financial management plays the most important role in every business for decision making, planning, control, etc. Here are the main points showing the importance of financial management. Main in business:

Financial planning – Decision making

Financial planning is a way of calculating the amount of capital needed by an organization and allocating adequate resources accordingly. A good financial plan helps answer the following questions:

The capital needed for the organization to stay afloat.
Proper financial allocation, overspending on a particular project can affect other business activities and it can cause a lack of finance in the business.
You can explore investment opportunities through good financial planning.

Once any financial decision for a business has been made, it cannot be easily undone. Financial decisions can affect the entire business because they affect all parts of the company immediately.

When you have good financial management and a full understanding of the financial situation, appropriate financial decisions bring efficiency to the business, such as funding decisions, resource allocation, profit distribution, etc.

Financial control

This is an important activity to ensure the business is working to achieve its goals. It is more about setting appropriate KPIs than reducing costs.

Tax planning

Financial management must include tax planning for a business. If a business doesn't properly plan taxes, it will end up spending unnecessary expenses.

Proper financial management of your business allows you to create the perfect financial and tax plan for your business, helping you get the most out of your tax policies and avoid the associated financial risks. to tax.

Business valuation

Good financial management helps businesses to be valued at the right value, quickly, thereby expanding access to investors interested in the business.