Financial Management Concepts in the Modern World
Financial management is the field that deals with managing monetary matters with the objective of profit maximization. Businesses need financial management on a regular basis and therefore they hire the best brains trained to handle finances. There are many ways to complete a
financial management course in India. A student interested in a
career in financial management can choose from a variety of fields. There are options such as chartered accountancy or a
business management degree specialising in finance. There are many
online courses available for both finance and non-finance professionals to hone up their
skills.
Financial management allows an organization to have a framework on which to base its financial activities. It provides clarity to various business processes and links the daily activities to the financial profitability and sustenance of the organization. In the modern world, financial management is necessary for both businesses as well as individuals. As the world operates on money, it is critical to be on top of one’s monetary requirements and plan for it in the long-term while planning for it in the short-term.
Also Read: How to start a career in Financial Analytics in India?
Financial management in the modern world means utilising integrative financial systems and controls which can enable an organization to monitor as well as regulate the way funds are consumed in their business. Financial success is defined by increasing the profits by increasing the earning and reducing the wastage of money through a well-crafted strategy and daily operational expertise. It is necessary to avoid debt and lead a stress-free life. Financial management also provides several other benefits. Some of those benefits are mentioned below.
Benefits of Financial Management
1. Increases the Efficiency of Modern Businesses
All businesses aim to become more efficient in their processes. Financial efficiency is important to reduce unnecessary spends and improve the profitability of the organization. By using financial
technology software like ERP solutions, a company can gain efficiency through automation and documentation of the financial process, reduction in turn around time and more evolved and transparent purchase decisions. It aligns various sales and
business processes of the company with the financial management of the company, thereby increasing the overall efficiency of the organization.
2. Provides A Business with Sufficient Liquidity
Any business requires sufficient funds to run smoothly and to execute its daily operations. Without enough funds to float around, a company would not be able to pay its vendors and employees, start
marketing campaigns or run its systems and processes, let alone manufacture goods and provide services. With financial management, a company can prepare its cash flow forecasts and budget planning. It can provision for all activities in advance and keep itself carry on smoothly. It can allocate its financial resources effectively and also raise additional capital ahead of time in case it is short of funds.
3. Aims at Maximization of Profitability
The ultimate aim of any business is to maximize its profitability. It is what allows companies to sustain themselves and keep functioning normally. It has a commitment towards its stakeholders to increase its profitability and provide good financial returns to its investors. An investor can only stay interested in a business venture as long as it is giving profitable returns on his investment. Profitability also serves as a competitive advantage in the market as it gives the company the financial strength to carry on in front of the strongest of competition and penetrate new markets as well.
4. Provides Monetary Security
With proper financial management, a company is able to divert its funds to safe investments. A sound financial manager invests the company’s funds in profitable assets and activities providing it with financial stability and security. Risky investments can derail the growth and development of an organization and put its existence in jeopardy. Financial management reduces risks and optimises the capital that a company has in hand. Capital budgeting techniques are employed by financial managers to evaluate the feasibility and the risk of undertaking any investment before a company puts their money in any big and long-term project.
Financial managers regularly use analytics and financial tools to decide the volatility and risk associated with any investment.
5. Provides Stability to an Organization’s Capital Structure
A company sources its capital funds from multiple sources. It takes loans from banks and raises capital from the market. Capital from different sources has different costs. Financial management ensures a healthy balance between different sources of capital in the company’s capital structure.
Financial management allows a company to function smoothly and stay aligned to the realities of the modern world. With the use of analytics and financial software, financial management in the modern world means answering the needs of an organization throughout its business journey.
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