May 2024

Finance Management

What is finance management

Finance management, as the name shows is a branch of management in which planning, controlling, organizing and directing regarding financial resources and activities takes place, or in other words the management of monetary activities and resources of an enterprise is known as finance management or financial management.

The finance managers have the responsibility to hunt ways with which they can collect financial resources for the operation of the company at low cost and to use them in a way that can help them in raising profit and generating revenues. Financial management is an important area of any business and the management of this department is usually based on a group of highly qualified accountants as this is an important part of accounting. A good finance director and finance manager can make all the difference.

Elements of financial management

There are three main decisions that come under finance management, Investment decisions, financial decision and the net profit distribution decisions.

In the category of investment decisions, financial managers make decisions for the company in which type of assets the company should make an investment in, or fixed assets or current assets.
In the category of financial decisions, finance managers have to make decisions regarding earning profit with as low a cost and with limited resources as possible. For the net profit distribution and decisions, managers have to decide about the distribution of the net profits that is usually paid in dividends out of retained profits, and how much should stay within the company. All kinds of decisions are made by experienced finance managers on the basis of the financial condition of the company as well as on the basis of the market trends.

Major objectives of finance management

Finance management has concern with the planning, organizing, allocation, controlling and assessment of financial resources with a couple of the major objectives. The objectives of financial management is to ensure a smooth, regular and effective supply of funds to different sectors of a company and to ensure the use of those resources or funds in a profit earning way.
The management has to keep a close eye over the achievement of the expected rate of return. The success of a company or a business is depending on the effectiveness of the finance management department of a company, and therefore it is important to have highly experienced & skilled staff in this department.

Apart from making decisions and planning regarding the monetary activities of a company, finance management also have to manage the financial reports and documents of a company to ensure smooth running of a business. This will allow management to make informed decisions.