Finance is the lifeline of a business organization. It needs to meet the requirements of the business concern. Each and every business must contain an adequate amount of finances for the smooth running of operations. The business goal of any enterprise can only be achieved with the help of effective financial management. You cannot neglect the importance of finance at any given time or in any situation. The role of financial management is far too essential in the growth and success of a business organization. Let’s study both the role financial management plays in business organizations and its importance.
Role of Financial Management
A business organization, as a system, has a dynamic flow of funds represented by the funds-flow cycle. Financial management is in charge of effective and efficient planning and control of the cycle of the flow of funds: inflow and outflow of funds. A financial manager is responsible for maintaining an appropriate magnitude of funds needed for efficient operations, wise allocation of financial resources to particular assets (fixed and current), and for fundraising activities both short-term and long-term.
Importance of Financial Management
- Financial Planning
Financial management enables to determine the financial requirement of the business and leads to take financial decisions accordingly. Financial planning is yet another important aspect of business concerns that helps to promote an enterprise.
- Acquisition of Funds
Financial management is concerned with the acquisition of required finance to the business. Acquiring needed funds play a critical role in financial management that involves a possible source of finance at minimum cost.
- Improve Profitability
Profitability is the major concern for any business organization and it purely depends on the effectiveness and proper utilization of funds by the organization. With the help of strong financial control devices like budgetary control, ratio and trend analysis, and cost-volume-profit analysis, financial management assists in improving the profitability position of the business.
- Proper Utilization of Funds
Goes without saying, financial management is all about proper allocation and utilization of funds. This process of financial management helps improve the operational efficiency of the business. When used accurately, it can reduce the cost of capital, increase the value of the firm, and strengthen the overall financial position of the business.
- Increase the Value of the Firm
Financial management is essential in the field of increasing the wealth of the investors and the business. The ultimate aim of any business is to achieve maximum profit and higher profitability that leads to maximizing the wealth of the investors as well as contributes towards the growth of the economy.
Nowadays, financial management is popularly known as business finance or corporate finance. The business and corporate sectors cannot thrive or even function without understanding the importance of financial management. If you are working in this domain, the sky’s the limit because every organization is looking for a certified and trained financial analyst who can manage their money effectively. Enhance your financial analytic skills by taking up a financial management online certification. A credible financial management course gives you exposure to factors affecting financial performance, modes of capital management, risk minimization strategies and more. Get hands-on learning with practical examples and exercise with a financial management online certification and take your career forward and upward in this domain.
Read more about the role of Financial management: https://talentedge.com/articles/role-financial-management-organization/