Guide to corporate financial management
Financial management refers to planning, organizing, directing and controlling the financial performance of a business.
"If you don't control your finances, you won't control your business."
If you are an entrepreneur, then you must know the importance of financial management in business. Financial management provides avenues for achieving goals in a business. It can be said that financial management plays the most important role in business.
However, there are still many entrepreneurs who are confused about Corporate Finance Management. If you are also confused, you have come to the right place. The main purpose of our today's article is to give you a clear understanding of the role and importance of financial management in business and to teach you how to manage it effectively.
What is Financial Management?
Finance is the lifeblood of every business. In order for money to generate money and bring more profit, effective financial management skills are one of the most important skills for CEOs.
Financial management refers to planning, organizing, directing and controlling the financial performance of a business.
Furthermore, it is concerned with the application of management principles to the finances of an organization according to the general principles and specific regulations of each country in the management of corporate finance.
The importance of financial management in business
Without a doubt, financial management plays the most important role in every business for decision making, planning, control, etc. Here are the main points showing the importance of financial management. Main in business:
1. Financial Planning – Decision Making
Financial planning is a way of calculating the amount of capital needed by an organization and allocating adequate resources accordingly. A good financial plan helps answer the following questions:
- The capital needed for the organization to stay afloat.
- Proper financial allocation, overspending on a particular project can affect other business activities and it can cause a lack of finance in the business.
- You can explore investment opportunities through good financial planning.
Once any financial decision for a business has been made, it cannot be easily undone. Financial decisions can affect the entire business because they affect all parts of the company immediately.
When you have good financial management and a full understanding of the financial situation, appropriate financial decisions bring efficiency to the business, such as funding decisions, resource allocation, profit distribution, etc.
2. Financial control
This is an important activity to ensure the business is working to achieve its goals. It is more about setting appropriate KPIs than reducing costs.
3. Tax planning
Financial management must include tax planning for a business. If a business doesn't properly plan taxes, it will end up spending unnecessary expenses.
Proper financial management of your business allows you to create the perfect financial and tax plan for your business, helping you get the most out of your tax policies and avoid the associated financial risks. to tax.
4. Business valuation
Good financial management helps businesses to be valued at the right value, quickly, thereby expanding access to investors interested in the business.
Guide to corporate financial management
To manage corporate finances, it is essential to understand the functions of the two types of financial management in a business. Those 2 functions are:
1. Functions of Financial Management
The task of financial management is to provide data, information and tools for the director of the enterprise to perform the following functions:
- Decide on capital structure, choose capital sources for your investment decisions
- Money management for business, financial and investment operations groups
- Take control of your finances using financial analysis, risk analysis, ratio analysis, cost reduction and sustainable profit growth.
2. Functions of Public Finance work
Today, whatever transaction you enter into, that is a “public” transaction, these include:
- Financial report
- taxes profile
- Financial indicators that enterprises must publish (Statistical indicators, investment reports ...)
