What if financial management

Financial management is closely related to accounting. In most firms, both areas are the responsibility of the vice president of finance or CFO.

Financial managers use financial statements and other information prepared by accountants to make financial decisions. Financial managers focus on cash flows , the inflows and outflows of cash.

Financial managers have a complex and challenging job. One day they may be developing a better way to automate cash collections, and the next they may be analyzing a proposed acquisition. The key activities of the financial manager are:. How can financial managers make wise planning, investment, and financing decisions? The main goal of the financial manager is to maximize the value of the firm to its owners.

The value of a publicly owned corporation is measured by the share price of its stock. Maximizing profits is one approach, but it should not be the only one.

Such an approach favors making short-term gains over achieving long-term goals. It should detail how you will finance your business and its activities, what money you will need and where it will come from - see write a business plan: step-by-step.

Monitor your financial position You should regularly monitor the progress of your business. On a daily basis, you should know how much money you have in the bank, how many sales you're making and your stock levels.

You should also review your position against the targets set in your business plan on a monthly basis - see cashflow management. Ensure customers pay you on time Businesses can run into major problems because of late customer payments. To reduce the risk of late or non-payment, you should make your credit terms and conditions obvious from the outset.

You should also quickly issue invoices that are clear and accurate. Using a computerised credit management system will help you to keep track of customers' accounts - read ensure customers pay you on time. Know your day-to-day costs Even the most profitable of companies can face difficulties if there isn't enough cash to cover day-to-day costs such as rent and wages.

You should be aware of the minimum your business needs to survive and ensure you do not go below this - see how to measure cash in your business. Keep up-to-date accounting records If your accounts are not kept up-to-date, you could risk losing money by failing to keep up with late customer payments or not realising when you have to pay your suppliers.

Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Strategic financial management means not only managing a company's finances but managing them with the intention to succeed—that is, to attain the company's goals and objectives and maximize shareholder value over time. However, before a company can manage itself strategically, it first needs to define its objectives precisely, identify and quantify its available and potential resources, and devise a specific plan to use its finances and other capital resources toward achieving its goals.

Strategic financial management is about creating profit for the business and ensuring an acceptable return on investment ROI. Financial management is accomplished through business financial plans, setting up financial controls, and financial decision making.

Financial management itself involves understanding and properly controlling, allocating, and obtaining a company's assets and liabilities, including monitoring operational financing items like expenditures, revenues, accounts receivable and payable, cash flow, and profitability.

Strategic financial management encompasses all of the above plus continuous evaluating, planning, and adjusting to keep the company focused and on track toward long-term goals. When a company is managing strategically, it deals with short-term issues on an ad hoc basis in ways that do not derail its long-term vision.

Strategic financial management includes assessing and managing a company's capital structure, the mix of debt and equity finance employed, to ensure a company's long-term solvency.

The term "strategic" refers to financial management practices that are focused on long-term success, as opposed to "tactical" management decisions, which relate to short-term positioning. If a company is being strategic instead of tactical, then it makes financial decisions based on what it thinks would achieve results ultimately—that is, in the future; which implies that to realize those results, a firm sometimes must tolerate losses in the present.

Part of effective strategic financial management thus may involve sacrificing or readjusting short-term goals in order to attain the company's long-term objectives more efficiently. For example, if a company suffered a net loss for the previous year, then it may choose to reduce its asset base through closing facilities or reducing staff, thereby decreasing its operating expenses.

Crises and setbacks can strike suddenly, from natural disasters to economic downturns, technical failures, partner bankruptcies and customer…. Business Solutions Glossary of Terms. October 2, Video: What is Financial Management? What is Financial Management?

Strategic vs. Importance of Financial Management Solid financial management provides the foundation for three pillars of sound fiscal governance: Strategizing , or identifying what needs to happen financially for the company to achieve its short- and long-term goals.

Objectives of Financial Management Building on those pillars, financial managers help their companies in a variety of ways, including but not limited to: Maximizing profits by providing insights on, for example, rising costs of raw materials that might trigger an increase in the cost of goods sold.

Ensuring compliance with state, federal and industry-specific regulations. Scope of Financial Management Financial management encompasses four major areas: Planning The financial manager projects how much money the company will need in order to maintain positive cash flow, allocate funds to grow or add new products or services and cope with unexpected events, and shares that information with business colleagues. Static vs. Flexible Budgeting. Static Flexible Remains the same even if there are significant changes from the assumptions made during planning.

Adjusts based on changes in the assumptions used in the planning process. Invoice regularly and accurately. Always state payment terms. If you make changes, call them out. Offer multiple ways to pay.