Financial Management
Importance of Financial Management
Financial
management provides pathways to attain goals and objectives in an organisation.
The main duty of a financial manager is to measure organisational efficiency
through proper allocation, acquisition and management.
The
importance of financial management is explained below −
·
It provides guidance in financial planning.
·
It assists in acquiring funds from different
sources.
·
It helps in investing an appropriate amount of
funds.
·
It increases organisational efficiency.
·
It reduces delay in production.
·
It cut down financial costs.
·
It reduces cost of fund.
·
It ensures proper use of fund.
·
It helps business firm to take financial decisions.
·
It prepares guideline for earning maximum profits
with minimum cost.
·
It increases shareholders’ wealth.
·
It can control the financial aspects of the
business.
·
It provides information through financial
reporting.
·
It makes the employees aware of saving funds.
Importance to Organizations
1. Business organizations
Financial
management is important to all types of business organization i.e., Small size,
medium size or a large size organization. As the size grows, financial
decisions become more and more complex as the amount involves also is large.
2. Charitable organization / Non-profit
organization / Trust
In
all those organizations, finance is a crucial aspect to be managed. A finance
manager should concentrate more on collection of donations and should ensure
that every rupee spent is justified and is towards achieving Goals of
organization.
3. Government or public-sector
undertaking
In
central / state Govt, finance is a key / important portfolio generally given to
most capable or competent person. Preparation of budget, monitoring capital
/revenue receipt and expenditure are key functions to be performed by the
person in charge of finance. Similarly, in a Govt or public-sector
organization, financial controller or Chief finance officer should play a key
role in performing / taking all three financial decisions i.e., raising of
funds, investment of funds and distributing funds.
4. Other organizations
In
all other organizations or even in a family, finance is a key area to be looked
in to seriously by a competent person so that things do not go out of gear.
Importance to all Stake holders
5. Share holders
Shareholders
are interested in getting optimum dividend and maximizing their wealth which is
basic objective of financial management.
6. Investors / creditors
These
stake holders are interested in safety of their funds, timely repayment of the
principal amount as well as interest on the same. All these aspects are to be
ensured by the person managing funds / finance.
7. Employees
They
are interested in getting timely payment of their salary / wages, bonus,
incentives and their retirement benefits which are possible only if funds are
managed properly and organization is working in profit.
8. Customers
They
are interested in quality products at reasonable rates which is possible only
through efficient management of organization including management of
funds.
9. Public
Public
at large is interested in public welfare activities under corporate social
responsibility and this aspect is possible only when organization earns
adequate profit.
10. Government
Govt
is interested in timely payment of taxes and other revenues from business world
where again efficient finance manager has a definite role to play.
11. Management
Management
is interested in overall image building, increase in the market share,
optimizing shareholders wealth and profit and all these aspects greatly depends
upon efficient management of financial resources.
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