The Financial Management main role is to plan, organise and govern all the financial activities of a company. It applies management ethics to the financial resources of a company. This practice controls all the economic operations of an enterprise like utilisation of funds, procurement of funds, payment, accounting, risk assessment and everything related to the cash.
Key Roles of Financial Management
Financial management governs all the financial activities of a company. A few key roles are mentioned below:
- Bookkeeping and Accounting: It is essential to identify, take appropriate measures and record all the financial details of a company. Whatever funds are debited or credited from a company’s account, the financial management efficient accounting system gives an overview. Also, the bookkeeping records the everyday transaction of a company and forms a base for the accounting system.
- Reporting: Most of the stakeholders depend on the organisation’s financial statement before making any decision. The finance team shares a financial report to its shareholders regularly. Depending on the report, the shareholder forecast on when to buy or sell the stock. So, the accuracy of the financial data is essential to make a decision.
- Receivables and Payables: Managing what your company owes to the vendors, and what the customer owes to the company is essential. It gives a clear view of how much liquid cash a company should have in all time.
- Investment Opportunities: The Financial report gives the opportunity to invest in the right stock and at the right time. Only after seeing the financial status, an organisation can leverage the correct openings.
- Risk: A robust financial management system is mandatory to maximise the profit and minimise the risk and liabilities. An efficient financial team should incorporate sufficient insurance to all the essential elements of a company.
Also Read:Scope of Financial Management
The above mentioned is the concept, that is elucidated in detail about ‘What is the role of Financial Management?’ for the Commerce students. To know more, stay tuned to BYJU’S.
FAQs
The Financial Management main role is to plan, organise and govern all the financial activities of a company. It applies management ethics to the financial resources of a company.
What is the definition and role of financial management? ›
Financial management is all about monitoring, controlling, protecting, and reporting on a company's financial resources. Companies have accountants or finance teams responsible for managing their finances, including all bank transactions, loans, debts, investments, and other sources of funding.
What are the key functions of financial management? ›
The primary function of managing business finances is estimating the amount of capital required. Estimating the capital is essential to determine how much capital a firm requires to purchase fixed assets, modernise and expand the business and meet the working capital requirement.
What are the roles of a financial manager? ›
Financial managers are responsible for the financial health of an organization. They create financial reports, direct investment activities, and develop plans for the long-term financial goals of their organization.
What is the role of financial management quizlet? ›
The role of financial management is to develop a tactical plan identifying short term objectives and strategies that enable finance to support the whole business in achieving its strategic goals. Objectives include profitability, growth, efficiency, liquidity and solvency.
What is the simple definition of financial management? ›
In business, financial management is the practice of handling a company's finances in a way that allows it to be successful and compliant with regulations.
What are the 3 types of financial management decisions? ›
There are three primary types of financial decisions that financial managers must make: investment decisions, financing decisions, and dividend decisions.
Which among the roles of financial manager is the most important and why? ›
The most important role of a finance manager in a business or company is that of accounting. The accounting department keeps a track of income, expenditures, and provides the management, investors, and the government with the required and quantitative financial information.
What are the four key functional areas of financial management? ›
Most financial management plans will break them down into four elements commonly recognised in financial management. These four elements are planning, controlling, organising & directing, and decision making.
What are the seven 7 functions of financial management? ›
It checks whether the activities are prolific and are in line with regulations. The seven popular functions are decisions and control, financial planning, resource allocation, cash flow management, surplus disposal, acquisitions, mergers, and capital budgeting. Give examples of finance functions in excel?
Finance functions cover Investment (allocating funds to assets for growth), Dividend (deciding on profit distribution to shareholders), Financing (raising capital through equity or debt), and Liquidity (ensuring sufficient cash flow for operations).
What are the 5 in financial management? ›
The ultimate goal of any business is wealth maximization, which can be achieved through the following 5 activities of financial management:
- Estimation of Capital Requirement. ...
- Procurement and Allocation of Funds. ...
- Determining the Structure of Capital. ...
- Distributing the Surplus. ...
- Maintaining Financial Control.
