Financial management is the process of planning, organizing, monitoring and controlling of financial resources to achieve business goals. Some basics of financial management are:
Budgeting. Budgeting comprises developing a detailed plan for income and expenses, outlining how financial resources will be allocated and utilized.
Cash flow management. Cash flow management refers to the process by which a firm maintains control over the inflow and outflow of funds. The primary purpose of cash flow management is to ensure incoming cash is always more than outgoing cash.
Financial planning. Financial planning involves setting short-term and long-term financial goals and determining the steps needed to achieve them. This may include forecasting revenues, estimating expenses and identifying potential sources of income.
Risk management. Financial management involves identifying and managing financial risks, which involves estimating potential risks including interest rate fluctuations, market volatility, credit risk and so on, and developing strategies to mitigate them.
Financial analysis. This encompasses studying financial statements, ratios and other financial data to assess the performance, profitability and financial health of a business.
Capital structure management. Determining the ideal mix of debt and equity financing for the business is also part of financial management.
Financial reporting. Financial management involves preparing and furnishing financial reports and statements to investors, shareholders, lenders, regulatory authorities and other stakeholders.
Investment decisions. Evaluating investment opportunities and making decisions regarding capital expenditures is also a crucial element of financial management.