What is Financial Management?

As the business expands globally, teams need to ensure that they have broad, fast and consistent access to financial performance.  Maximizing financial visibility and returns means developing, evaluating and adapting operational processes and objectives to meet ever-changing market demands.  One critical business component completes the financial management of an organization.

Understanding Financial Management

Financial management is a practical strategy to establish, control and monitor all financial resources to achieve business objectives.  It covers the various areas of work in the finance department related to profitability, expenses, cash flow, credit, etc., where the financial manager works with the Accounting, Accounts Payable, and Accounts Receivable teams.

To build a profitable treasury management business strategy, you must stick to three guiding principles:

• Predict your financial performance with future financial forecasts, the tested 
• capabilities you need to drive growth, and prepare for your capital needs.
• Setting priorities for long-term initiatives.
• Business models, marketplace dynamics, and plans that fit your organization.

An effective financial management plan gives your finance team the data they need to make informed investment decisions and continue to create a business plan that provides the insights needed to finance those investments, liquidity and profitability.

The importance of financial management

As the world expands through globalization, businesses need to compete in the marketplace if they want to grow steadily over the long term.  Also, to achieve revenue performance over the long term, your business needs some sort of financial management framework.  It is important for organizations to implement a system that tracks all revenue streams so that they can:

• Assistance in future financial planning and securing funding.
• Provide economic stability.
• Increase overall organizational value and profitability.
• Delivering defined data to support critical financial decisions.
• Optimize workflows to effectively allocate resources and funds.

Options available for managing a company's finances range from external consultants to internal financial managers.  These people or groups will need access to the company's full financial information (historical and current data) in order to map the company's future opportunities.

Comparison of strategic and tactical management

There are two types of financial management procedures: strategic and tactical.  While your finance teammates use these hybrid tactics, your end goal will dictate which process your finance team will focus more on.

Finance leaders and directors will focus more on strategic methodologies.  In gathering data necessary for financial planning and analysis (FP&A) and establishing organizational goals, finance directors at this level plan for future investments and opportunities, helping to build resilience within the company.

Financial managers at the tactical level perform day-to-day tasks such as monitoring daily transactions, monthly financial closes, and accounting for fixed assets according to actual expenditures.  We also track full transaction coverage to ensure regulatory compliance.

financial management strategy

Having a strong and agile financial plan aligned with your current business needs, needs and goals is a key element in ensuring your company's long-term success.  Building a strong strategy will help you achieve this outcome.  Here are four financial management strategies to help you achieve your goals.

1 .Assessment of past expenses and income.

Accurately tracking past and present expenses is critical to determining your financial future.  Here you can see which plans have been successful and which areas need to be optimized and improved.  Past revenue is your indicator of success, so analyzing this data will determine where you need to change your current performance and goals.

2. Build a profit and loss (P&L) statement.

An income statement, also called a P&L, is a summary of a business's financial performance.  Record your monthly income and expenses in this document to alert your team to whether your finances are in a profit or a deficit.  This statement shows revenue, cost of goods, expenses, gross profit, and net income.

3. budgeting.

You need to anticipate how you plan to use company funds.  By setting guidelines on how to manage your spending while tracking your financial dependencies, you can make informed decisions using data-driven insights to ensure revenue growth.  When you're budgeting, you should ask yourself a series of questions, such as how much are your revenue plans for the period and what are your operating expenses.

4. Track company spending in advance.

Having visibility into every transaction is essential to track how much money is being spent.  Comprehensive software integration tracking financial analysis provides:

• Real-time visibility into your spending to understand how much, when and where you spend it.
• Synchronizes instantly with your accounting platform for convenience.
• Quick comparison and trend review of current budget and P&L.
• A top-line view of your entire company spending by single user or transaction type.

You can choose or mix any of these strategies to save money and increase your profits.  Adding a financial management system to your process makes it easy to follow multiple strategies with minimal errors and manual effort.

Choose a good financial management tool

When deciding which financial management software is right for your business, you will need a tool that simplifies the collection of all payments and ensures compliance with tax and accounting regulations.  You'll also want software that eliminates the possibility of errors, manual work, and duplication all at the same time.  Some additional features of a good financial system include:

• Transparency of all deposits and withdrawals.
• Income Statement, Expense Statement, Balance Sheet Reconciliation.
• Balancing multiple accounts and easy book management.
• Data integrity and security assurance.
• Track all your debts and latest records.
• Maintaining a complete and accurate audit trail.

All this budget data can help you make decisions that positively impact your business.  A transparent and flexible financial management system that can accommodate change means a company's long-term sustainability.