The planning, organizing, monitoring, as well as controlling of financial resources of clients, a company, or an organization. The aim of financial management is to help a company to achieve its objectives and goals.
For a successful or well-run business, financial management is a vital component. Entrepreneurs must have good financial management skills for the smooth journey of a startup. It is very important for the current functioning as well as the future of your company.
Definition of Financial Management
Solomon defines financial management as the effective use of capital funds which is a vital economic resource. According to Phillippatus, financial management is closely related to the managerial decisions which decide the financing and acquisition of short-term and long-term acknowledgment for the organization.
A financial manager can deal with the financial management objective and strategies of an organization. He/She will be analyzing the procured funds and plans for the proper utilization of these foods. The manager will be informing the company whether the funds are properly allocated to meet different needs.
What is Financial Management in Procurement?
Financial Management Institute explains Financial Management in Procurement as the management of the whole procedures in the effective deployment and acquisition of short-term and long-term financial resources as they are closely associated with the purchase of various products and services. The responsibilities of Financial Management in Procurement include an appraisal, selection, as well as the development of official legitimate agreements. Financial Management in Procurement for companies and businesses will include facility purchases, managing telephone bills, hiring new employees to the company, budgeting for new projects, etc. For individuals, financial management will include shopping, monthly expenses, monthly budget, etc.
Examples of Financial Management
The business activities and the person or company’s account are what classify financial management. Here are some examples of financial management.
- Suppose you want to purchase a new building for your company and you need to get a loan for it. Here, you can take the advice from a real estate expert and find out whether the long-term value will be more than renting the building or not. Also, consider offering 20% as a down payment and taking the rest 80% as the loan will fetch you profits on your investment. In many cases, renting will be more beneficial than purchasing it.
- Suppose you are thinking of buying a new house in the form of a mortgage loan where you will have to give 80% of your salary as EMI to reach your financial goals. Here you have to consider some factors. 50% of your total salary will be used for basic necessities like rent, groceries, transport, utilities, etc. Another 30% will go towards lifestyle expenses like dining, shopping, etc. 20% will be dedicated towards your future savings like retirement planning, debt payment, emergencies, etc. Therefore, according to the best strategy, if you are keeping 80% of your salary for the repayment of your mortgage, you will have to revise such financial plans and improve them in a better way.
- Financial management in crypto: Financial management in crypto involves diversifying your portfolio, managing risks, conducting research and analysis, tax planning, and taking security measures to protect your assets. Nowadays crypto involvement has increased among people due to its high earning potential. According to the 200 euro am tag verdienen, it is possible to earn 200 – 500 euros per day online with crypto.