Importance of Financial Management in An Organization
Why is financial management important?
- Helps organizations in financial planning;
- Assists organizations in the planning and acquisition of funds;
- Helps organizations effectively use and allocate funds received or acquired;
- Supports organizations in making important financial decisions;
- Helps organizations improve profitability;
- Increases the overall value of firms or organizations;
Importance to study financial management: –
Diversified Career Opportunities: Studying financial management opens up a variety of career opportunities. This can be in the private or public sector. Some career options include investment banking, entrepreneurship, financial analysis, financial and managerial accounting, and strategic financial management. It is also beneficial for those who are interested in starting their own business.
Doing a financial management course or obtaining a finance degree can help people get a promotion or a better accounting job.
Improving interpersonal skills: By taking a course in this area, you will build better communication and teamwork skills by developing relationships with your colleagues.
Builds personality: Taking a course in this field also helps in improving your soft skills. This is because people wishing to work in this field should be extinct and spend hours talking fully about finances. This helps in improving their personality, knowledge, and communication.
More job prospects: The demand for finance manager jobs in the US has increased due to the “increasing range of financial products and the need for in-depth knowledge of geographic areas.” This is further proved by the fact that career demand in financial management has increased by 14%. A career in financial advice has increased by 32%, and a career in financial analysis by 23%.
Career Development: There is always an opportunity to develop your professional skills and climb the career ladder. You can get in-depth knowledge of financial management systems and financial management software once in this field. If you possess this knowledge and great qualification skills, then this field is perfect for you.
Financial Management in General Operations
In its normal operations, a company provides a product or service, makes a sale to its customer, collects money, and starts the process again. This means managing the turnover ratio of raw materials and finished goods inventories, selling to customers, and collecting receipts on a timely basis, and starting by purchasing more raw materials.
Meanwhile, the business must pay its bills, its suppliers, and its employees. All of this must be done with cash, and it takes astounding financial management to ensure that these funds flow efficiently.
Even though economies have a long-term history of going up, sometimes they will also experience a sharp decline. Businessmen should plan for adequate liquidity for these economic recession seasons; otherwise, they may need to close their doors for lack of cash.
Reporting on business operations
Each business is responsible for providing reports of its operations. Shareholders want regular information about the return and security of their investment.
State and local governments need reports so that they can collect sales tax. Business managers require other types of reports with key performance indicators that measure different parts of their businesses.
Also, a comprehensive financial management system can produce the various types of reports required by all these different entities.
Filing and paying tax
The government is always around to collect the tax.
Financial management should plan to pay their taxes on time.
Financial management is an important skill of every small business owner or manager. Every decision that an owner makes will have a financial impact on the company, and he must make these decisions in the overall context of the company’s operations.