While everyone knows that finances
breathe life into organizations, it is surprising many organizations fail to
manage it effectively. Any business can stay in the pink of its health only
when it pays close attention to the financial
management.
Finance management is more than a
balance sheet or a profit and loss account. A lot is at stake for organizations
in the market, and hence it is important that finance
management is taken seriously for the following reasons:
Financial
Planning
Let’s say; you are bidding for a
construction project. If you win the tender, it could send your profits
soaring. But, before you bid, you need to analyse
whether your business has the financial capability to execute it. You would
need money to procure raw materials, hire labour
and other personnel, incur transportation costs, and so on. The financial
planning will help you to determine all these aspects.
If you are a finance manager dealing
with project management for the first time, it would be a good idea to enhance
your knowledge and pick up important tips through short-term online finance courses for working professionals.
Return on
Investment (ROI)
How do businesses measure their growth
and profitability? By a simple metric called ROI! The more the returns on
investment, more positive the growth is. The financial management ensures that
all funds are effectively utilized to generate maximum returns. If you don’t
manage money, it would be difficult to arrive at the profitability figures.
Cost
Management
The cost management refers to the
process of planning and controlling the
budget of an organization. It requires evaluating various cost drivers which can not only reduce costs but also show the way to optimize the
financial performance of the business. Irrespective of their size, all
organizations of every nature strive to achieve cost efficiency.
Operating
Cash Management
The fixed capital is akin to the
corpus of a business. It is deployed to meet major capital expenditures such as
the purchase of machinery or buying land.
But, it is the operating cash which keeps the day-to-day
business running seamlessly. Ideally, the organization should be able to
generate operating cash flow from within the company revenues. If it depends on
external credit, it is a red flag. If the financial management of the company is in strong hands, such a situation
can be deftly avoided.
Distribution
of Profits
When companies generate surplus
profits, it is their onus to distribute it to
the stakeholders such as employees or shareholders. The surplus distribution is
an indication that the organization is
financially strong. Unless finance management is done right, this may not
happen.
In order to get a deeper
insight on this subject, you can enroll
in financial management course online.
