Importance of financial management Financial management means planning, funding, organizing and allocating effectively and efficiently all the financial activities of an enterprise. It simply means management of funds or money to avoid misuse or run out of shortage.
The business needs this to avoid funding services or goods with low return capital. Balancing of cash inflow and outflow is required. It’s work of financial management to arrange all this. The aim of an enterprise is to make profit hence they should invest in services or goods with high returns.
Availability of working capital.
Work of financial management is to make sure that working capital is there and sufficient. Running business operations without or with low working capital is difficult. Financial management ensures that business operations are met adequately and on time.
Each and every decision management takes must target profit maximization. Business is after profit. Hence, management must ensure that each capital that gets out of business must come in with return.
The work of financial management is to ensure funds that belong to the business are safe. This is achieved by saving money in big and safe banks. Not just by any bank. They should consider buying shares in big enterprises and successful ones. They should avoid also having idle funds.