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Why is financial management important?

Why is financial management important?

Financial management is one of the most important element when it comes to starting or even running a successful business. Every business personnel are expected to possess excellent knowledge in financial management. Read on to find out what exactly comprises this form of business management and the perks of having it well-founded within an organisation.

What is financial management?

Financial management is an umbrella term for all financial undertakings in a business entity or an institute. It not only includes the applying of management principles to the financial assets of a company but also the implementation of strategic planning, directing, organising, and controlling. Take a look at the objectives related to financial management:

  • Maintaining a continuous supply of funds for the company;
  • Ensuring good returns on their investment are provided to the potential shareholders;
  • Optimum and efficient utilisation of available resources;
  • Identifying legit and safe investment opportunities.

You know what? According to the Financial Employee Wellness Survey- PwC statistics published on the website Money Habitudes, almost 71% of Millennials expressed their stress level to have increased due to financial issues. Why does this matter? The data also emphasises that the number of employees worried about their finances had increased across all generations, and is set to skyrocket by the end of 2020. This calls for every business entity to get a solid financial management system in place.

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No matter the type of firm, the financial management department is expected to handle certain functions on behalf of the entire company. Here’s a couple of such tasks:

Calculating the capital required


This includes calculating the amount of fund required by an organisation. The estimation can be made with regards to expected expenses and profits.

Formation of capital structure


The next step is to form a capital structure needs which requires debt-equity analysis in the long-term and short-term. This is calculated based on the amount of the revenue the firm generates, and what needs to be raised from external sources.

Investing the capital


It then assists the firm to invest money to generate more capital and obtain regular returns. Financial managers are accountable to execute this process so that the organisation’s funds are channelled through profitable and safe ventures.


Allocation of profits


It is the financial manager’s duty to efficiently allocate the net profit earned. This includes implement it for innovation, contingency, or expansion purposes, as well as provide dividends to the shareholders.



Effective management of money


The final step is to effectively manage the firm’s money. This is essential for the payment of salaries and bills, meeting liabilities, maintaining stock, and purchasing of any equipment or materials.

How can you actually use this? Well, the above-mentioned processes are not just applicable for large scale business but for personal finances as well. A good grounding of financial management will allow you to practice independently as financial and wealth managers as well. Run a check for more details about financial management on our website and apply for a programme of your choice!

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