Financial management can be defined simply as the discipline or role in an organization that is primarily concerned with costs, assets, money and financing, in order for the organization to have the means to deliver goods and services that are worth the amount of the financial assets that are invested in that are needed for the company. It includes the control of resources allocated to particular purposes and the allocation of financial resources between different activities in the different operational areas of an organization. This also involves the analysis of the financial situations of a company and the review of the risks related to those assets and liabilities that the company has, and decides the ways to reduce the effect of events that can lead to financial losses.
In order for any business to achieve maximum profitability and avoid financial losses, financial management has to involve all the people in the company, including the managers, financial officers, auditors and shareholders. The various roles and functions that they play include, planning and forecasting of the future financial transactions of a company, and forecasting the changes in financial resources of the company that are required for the smooth functioning of the company. They also provide guidance to the sales and marketing people by providing them with strategies that would ensure the achievement of customer requirements. The financial managers perform evaluations and make decisions concerning investments in order to maximize the return on the financial resources and reduce the cost.
To avoid financial problems in the future, it is very important for any company to have a sound financial management system that can bring it out of any financial crisis and help it cope up with the financial challenges that it might be facing in the near future. In order to achieve this goal, it is important for the company to appoint professionals who have an expertise and experience in financial management. These professionals would have thorough understanding of the role of finance and would therefore be able to guide the company successfully towards the right track. Apart from advising the company about its current financial position and future prospects, financial management specialists would also help the company get out of financial problems that it may be facing by giving advice and recommendations in the right direction. By appointing financial managers for the company, one is not only helping the company save money but also helps it manage its finances effectively.