Financial management refers to any of the several aspects of finance that deals with the control and management of financial resources. Financial management can also be defined as the department or role in an organization that is primarily concerned with finances, assets, liabilities, financing and the ability of the organization to handle credit, so the “financial institution” can have the means to carry on business normally. Financial management is one of the most important aspects of any organization. Without it, any organization will surely fail. It is therefore important for the organization to maintain a good financial management system that will help to ensure maximum output at minimum input by the financial managers.
The first step towards financial management is defining the purpose of your financial management system. This will help you in determining what specific functions and/or services your organization needs. The next step is identifying those particular functions that need to be maintained, with a view to achieving the desired objectives. When you are done with this step, you can start thinking about those particular financial products or services that will help you in realizing your goals. This financial planning will involve setting specific financial objectives, financial risk management, allocation of financial resources, allocation of financial risks, evaluation of the functioning of the financial system, planning for the future, financial consulting services, etc.
A proper financial management system is designed in such a way that it provides the necessary guidelines or rules that have been laid down for the financial activities of the firm, which will ensure the smooth working of its financial processes, activities and systems without affecting the overall financial condition or giving rise to any unexpected problems. For instance, a company needs to have a proper financial management system in place before proceeding with any fiscal policy or planning. It is also important to note that no single approach can serve the entire purpose of financial management. Every financial process, product or service has a wide range of interactions and needs. Therefore, the various financial elements and attributes should be analyzed and evaluated on a case-to-case basis as per the peculiarities of the specific financial activities or products.