The Purpose of Financial Management in Corporate Functions

Financial management is a process in the company's financial activities related to efforts to obtain funds and financial management efforts. The goal is to achieve the financial goals set in the business entity or company. With good and correct management, your business and business can continue to run and will continue to grow.

Finance is the most basic aspect and is very risky so it must be managed properly. Therefore, you must plan your finances carefully to avoid problems that could hinder the development of your business in the future.

To keep your business running smoothly, financial management that you have to do includes income and expenditure plans, storage, management, to controlling company funds and assets.

Main Functions of Financial Management

To make it clearer, below will explain things about financial management that you need to know as a business or business person. The following are some of the main functions of financial management in each company.

1. Financial record keeping

As a first step, financial management is concerned with recording accounting activities with accurate data for all company activities. These records will form the basis for managerial decisions, reports to shareholders or investors, and statements to banks and other lenders.

2. Financial planning

This relates to taking steps to deal with problems that occur in business development. In financial planning, you as a business person must always ensure that there is sufficient working capital to support business growth and set sales targets.

You should also create a budget with certain benchmarks to measure the company's performance. Not only that, there are also other aspects that need to be considered, such as regular tax payments.

3. Company financial control

There is no business or enterprise of any scale that does not make expenses. Therefore, you have to keep an eye on every number that is issued to ensure that no funds are wasted.

This financial control includes increasing profit margins, implementing controls on selling administrative costs, as well as purchasing assets that are in accordance with needs and are not excessive. Also do an internal audit to analyze each risk so you can find out which areas in your business need improvement.

4. Funding and capital structure

In developing a business, of course you need a sufficient supply of funds to support this. This is where the financial manager plays a role in ensuring there are sufficient funds and determining the answer, whether it is better to seek loans or add investors.

Maintaining a balance between debt and business equity is the goal of financial planning. There are factors that must be considered in making a decision, such as interest rates, the creditworthiness of the company, and the ability to attract more shareholders.

5. Principles of financial management

In practice, financial management is the action taken to maintain the financial health of the company. In order to build a good financial system, you need to identify financial management principles to apply in your business environment.

Principles of Financial Management

You also have to hold the principle in managing finances. The following are the principles of financial management that you need to know:

1. Consistency

The company's financial systems and policies must be consistent from time to time. This does not mean that financial strategies cannot be adapted to changes that occur. However, an inconsistent approach can be a sign that there is manipulation in financial management.

2. Accountability

Accountability is an inherent moral obligation about how company funds and assets have been used. Companies must be able to explain the results of using finance as a form of accountability to stakeholders and beneficiaries.

3. Transparency

Companies must be open in providing information related to business plans and activities. Therefore, you must ensure that financial reports are accurate, complete, timely, and easily accessible to stakeholders and beneficiaries.

4. Survival

In order to maintain good financial management, expenditures at the strategic or operational level must be adjusted to the supply of funds received. With a good financial plan, it will be seen how the level of security and sustainability of a business or company.

5. Integrity

Finance is the most important company foundation so the individuals involved must have good integrity. Not only being able to maintain the company's financial system, financial reports and records must also be tested through the completeness and accuracy of records.

6. Management

The company must be able to properly manage the funds that have been obtained and ensure their use is in accordance with the stated objectives. In practice, good financial management can be seen in careful strategic planning, identification of financial risks, and control systems that are in accordance with the company's current condition.

7. Accounting standards

The accounting and financial systems used in a business or company must comply with generally accepted accounting principles and standards. That way, every accountant around the world can understand the system used to avoid abuse.

Financial management is not just counting the numbers in and out. It still requires maturity in planning, accuracy in cost control, and utilization of results that support the company's future growth. With good financial management, your business will be able to run smoothly in the future.

Find out more about financial management by attending training. Prasmul eli has a Finance for Non-Finance Professionals Program to help understand the basics of financial management and investment decisions.