When running a business, the financial aspect is the most important factor to consider. Financial management is essential for managing a company's finances. To achieve continuous business growth, sound financial management is essential.
Through financial management, companies can monitor their cash flow and operating costs as a basis for decision-making. This article will delve deeper into what financial management is, its principles, and its functions.
Understanding Financial Management
Financial management is a company's activity that encompasses the acquisition, planning, auditing, management, and control of company funds to achieve company goals. In the business world, financial management aims to increase profits, minimize costs and risks, and maintain the company's financial health in both the short and long term. Financial management relates not only to the management of company funds but also to the management of investment resources.
Meanwhile, according to financial management expert Grestenberg, financial management is a company's method for obtaining, using, and distributing funds.
Financial management plays a crucial role in formulating company strategies for future planning and serves as a basis for decision-making based on relevant data. In addition, financial management also plays a role in ensuring that company performance is in line with existing strategies.
Principles of Financial Management
In practice, financial management requires several principles, including:
1. Consistency
Financial management must be carried out consistently at all times based on the company's principles and objectives.
2. Transparency
Companies must be transparent in providing accurate and easily accessible financial reporting information to the public.
3. Accountability
The company's moral obligation to explain how it manages and accounts for its use of funds.
4. Sustainability
Financial management must ensure the company's survival so that it can carry out business operations in the long term.
5. Integrity
As a financial manager, an attitude of honesty and integrity is required in managing funds.
6. Accounting Standards
Every company is required to use accounting standards that apply both nationally and internationally in managing its finances.
7. Management
Companies must manage funds responsibly and prudently to achieve their stated goals.
Financial Management Functions
Here are some financial management functions you need to know:
1. Planning
The first function of financial management is planning. Financial management functions to manage the company's income and expenditures over a specific period. Calculating profit and loss through detailed financial records will help the company make business decisions and plan strategies carefully.
2. Budgeting
This function relates to the allocation of funds for the company's operational activities. Through this function, the company is expected to achieve effectiveness and efficiency in managing funds.
3. Controlling
Financial management cannot be separated from the control function. This function relates to the monitoring of cash inflows and outflows and the evaluation of financial management.
4. Auditing
Audits are also conducted in financial management to ensure that managed funds comply with accounting standards and prevent misuse.
5. Reporting
The final function of financial management is reporting. This function analyzes the company's profit and loss ratios to determine whether they are healthy.
Financial management is crucial for the sustainability of a company's business. Therefore, a professional financial manager with extensive knowledge of financial management is needed to assist the company in achieving its business goals.
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