financialtreat – will explain about Financial Management in the Company that you will get in the following article. Let’s look at this article carefully!
Financial management in a company can be said to be an obligation. This is because the financial aspect is an important pillar in a company. Without funds, the company cannot operate. In addition, there needs to be good management so that no problems arise and funds can be used effectively.
As long as the company has an adequate cash supply, the cash management area requires special attention. Management must find a source of funds to adjust the necessary cash. Responsibility for cash management within the company is the responsibility of financial management.
Understanding Financial Management
According to Lehman, financial management is an effort to provide money and use the money to earn or obtain assets. According to Prawironegoro Financial management is the activity of the owner and management of the company to obtain capital that is as cheap as possible and use as effectively, efficiently, and productively as possible to generate profits.
Simply put, financial management is any activity related to the management of funds in a company. This series in financial management starts from where the source of income comes from and how the funds are used by the company.
Who has the right to manage finances?
The policies of each company vary, but usually, this process is handled by a financial manager. The position of financial manager acts as a manager, supervisor, and regulator of the use of funds in a company to avoid the risk of bad things related to finances.
Financial Management Activities
1. Get company funds
One type of financial management activity is to get the source of company funds so that the company’s operations continue to run. The source of funds in question can be capital or debt.
Capital in a company is divided into two categories, namely investment, and savings. While debt is usually in the form of borrowing capital from banks or raw material credits from suppliers. Both sources of funds can come from internal and external companies.
2. Using company funds
Using company funds means that existing funds will be allocated to various activities and needs of the company. Its use can be in the form of asset purchases, financing operational costs or investment processes.
3. Managing assets
After obtaining assets from the funds issued, the assets are not left alone. There needs to be proper management so that the assets purchased can generate profits and function effectively for the company.
Financial Management Function
We come to the function of financial management. Of course, from the previous description, we can already get an idea of the function of financial management. Because the task of financial management has explained its function as well.
Even so, there is a difference between the purpose and function of financial management.
Planning
A company will be built by a number of plans initiate and execute by its leaders. Well, in making such planning there is a role of financial management in it.
The function of financial management is to make estimates relate to the company’s capital needs. Furthermore, the costs and profits that have been determine and run by each division will be monitor by financial management. Therefore, from the beginning the role and function of financial management is very necessary.
Budget
Everything that deals with finance is certainly the responsibility of financial management. Therefore, the function of financial management in budget matters is very important. Planning of receipts and allocating cost budgets must also be ensured efficiently. That way, the funds owned by the company can be maximized properly.
Control
Financial control becomes the responsibility of financial management when various activities in financial management begin to run. This control becomes part of the financial management function, so that everything can go according to plan.
Even if there are differences or changes in the journey, everything can still be controlled properly. So that in the future there are no problems that can be fatal to the company.
Auditing
Another function of financial management is to conduct internal audits. With the implementation of the audit, financial management has carried out its function as the organizer of the company. Auditing is also carried out to ensure that the operation or implementation carry out does not occur deviations.
The audit conducte must also use establish accounting standards. The stages of auditing carried out include analyzing, assessing, reviewing, and weighing the work of each relate division and company. Then, financial management will compare it with various standards that have been determine by the company.
Report
The last function of financial management reports. After planning, supervision, and auditing, the function of financial management is to provide a report on the company’s financial condition. In addition, financial management will also provide analysis related to the ratio of financial statements. This report is very important and becomes a reference for actors in making business decisions in the future. Typically, these reports will be compile quarterly, semesterly, and yearly.
Scope of Financial Management
In financial management activities, many decisions must be taken by the financial manager and the various activities that must be carry out. Because it becomes important when a manager has to make a decision relate to the management function.
Investment Decision (investment decision)
Investment decisions are decisions on what assets will be manage by the company. This investment decision is the most important decision among the three functions. This is because this investment decision directly affects the investment rentability and cash flow of the company for the foreseeable future. Investment rentability (return on investment) is the company’s ability to obtain profits generate from a person.
Funding Decision (financing Decision)
Funding decisions focus on two things. First, the decision on determining the source of funds need to finance the investment. The source of funds that will be use to finance the investment can be short-term debt, long-term debt and capital itself.
Second, the determination of the best spending balance or often referr to as the optimal capital structure. Therefore, it is necessary to determine whether the company will use external sources of funds derive from debt by ordering new shares so that the burden of capital costs borne by the company will be more minimal.
Asset Management Decision
Financial managers along with other managers in a company are responsible for various levels of operations of existing assets. Allocating funds use for procurement and asset restriction is the responsibility of the financial manager. The responsibility requires financial managers to pay more attention to the management of current assets than fix assets.
Financial Management Objectives
Please note that financial management objectives are not only limit to managing funds within the company. Some of the points below are also the purpose of implementing this management process.
Maximizing Company Wealth
The wealth of the company such as fix assets and finances will be useless if only own without being manage optimally. Relate to the budgeting function, the use of good management, the company’s wealth will bring maximum results.
Maintaining the Company’s Cash Flow
Often hear the big proverb of pegs rather than poles? One of the goals of financial management is to avoid spending greater than income, namely by maintaining and supervising the company’s cash flow.
Reduce The Company’s Operational Risk
Financial managers will be able to reduce the risks that may occur with good strategy and management. Because any financial decisions taken will affect the business risks face by the company at any time.
Principles of Financial Management
When implementing the fund management process, there are several financial management principles that need to be adhere to.
1. Transparency
As much as possible the company should be open to the authorities in the process of money management. The principle of financial management transparency can be demonstrat by providing complete and accurate financial information without any manipulation.
2. Accountability
With regard to transparency, the principle of accountability must also be apply. With accountability, all information provide must be account for. This will affect the presence or absence of financial irregularities in the company.
3. Consistency
The company’s fund management system should be carry out consistently. It also affects the emergence of operational risks due to changes in the system to financial management.
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Financial Management Job Prospects
By having the ability in financial management, it is not impossible for an individual to be able to find and build good financial management job prospects.
1. Financial manager
Generally, the job prospects of financial management are the responsibility of a financial manager. It is clear that the profession of financial manager is in need of ability and expertise in this field. Because the responsibility is the continuity of the company itself, the duties of the financial manager are considere quite heavy. So this profession is usually considere a high position compare to other employees of the company.
2. Entrepreneur
As an entrepreneur, of course, he does not want his business to run without bringing maximum results. That way, good management ability can be one of the ways for the company’s operations to run effectively and efficiently.
3. Accountant
An accountant is task with making a financial statement for the company, such as taxation reports. In addition, accountants can also evaluate the budget as a way to improve the company’s own finances or provide recommendations for increasing income.
This profession is slightly different from that of financial managers. If financial managers tend to take part in the allocation of funds to asset management, usually an accountant will struggle with financial statements only.
Well, already know about financial management in the company. Hopefully this information can provide you with knowledge on how to manage the company and finances well, yes!