It might not always be at the front of mind, but financial management plays a critical part in the growth and success of a business. In order to continue business as usual, finances need to run smoothly, which is why financial management and up-to-date software solutions can have a significant impact on the growth and success of businesses. If you are looking to better understand the purpose of financial management, read on.
What does financial management include?
Financial management combines various elements in order to maintain profit maximation, budgeting and all costs for rent, office supplies and tools. Financial management will help business owners make decisions on:
- Investment: Investment of fixed and current assets maintains the security at a certain level of capital budgeting.
- Finance: This includes the investment of new services and products, projected profitability and times spent on existing and new customer solutions.
- Dividends: Net profit distribution needs to be decided based on shareholder scope as well as retained profits.
Generally speaking, financial management’s objective is to manage and disperse all budgeting and revenue for a business. This objective supports a number of goals and procedures necessary to run a business, including:
- Regular supply of funds for all aspects of the business: Consistent management of budgets and necessary funds for COGs, resources and salaries.
- Adequate shareholder returns: Ensure shareholders receive returns efficiently
- Utilising funds to optimise business growth and goals: Extra revenue or business opportunities can be better managed and taken advantage of with the right software
- Ensure safety on investments: Software comes with the assurance that systems are managed appropriately, and investments have reduced risks
- Planning a feasible capital structure: Strategy and capital processes can be challenging when you are managing the BAU of the organisation. Financial management supports the planning of strategy to get you ahead of the curve.
What is included in financial management?
- Estimate capital needs
- Choose sources of funds
- Loans necessary – from banks and financial institutions
- Investment of funds
- Disposal of surplus
- Retained profits
- Cash management
- Financial controls
- Declaring dividend
- Public deposits to be drawn
A finance manager has to make decisions around wage payments and salaries, payment of bills and maintenance of stock. They also need to decide on how to allocate funds, where to invest funds and manage retained profits.
Loans and deposits need to be considered decisions that factor in the choice of bank, the future objectives and all current and future necessary finances.
Financial management using ERP
With the digitisation of financial management, it is near impossible for a business to function well without the help of ERP (Enterprise Resource Planning). Innovative accounting software integrates all processes and operations into a single platform, streamlining communication, managing costs and supporting business growth. With the right integrated platform your business can:
- Reduce costs on operations and budget
- Improve business insight
- Enhance collaboration
- Improve efficiencies
- Free up time to focus on the business
ERP software not only benefits business owners but supports additional staff as well as overall customer satisfaction. It can be overwhelming knowing where to start and knowing what software is best, but with the support from Arrow, you can rest assured you’ll get a tailored recommendation.