Effective Financial Management for Business Success

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Table Contents Definition Introduction Importance of Financial Management Scope of Financial Management Objectives of Financial Management Functions of Financial Management Financial Planning Conclusion 2

Definition In simple terms, financial management is the business function that deals with investing the available financial resources in a way that greater business success and return-on-investment (ROI) is achieved. 3

Introduction Financial management professionals plan, organize, and control all transactions in a business. They focus on sourcing the capital whether it is from the initial investment by the entrepreneur, debt financing, venture funding, public issue, or any other sources. Financial management professionals are also responsible for fund allocation in an optimized way to ensure greater financial stability and growth for the organization. 4

Symptoms of Financial Management 5

Importance of Financial Management The financial management of an organization determines the objectives, formulates the policies, lays out the procedures, implements the programmes, and allocates the budgets related to all financial activities of a business. Through a streamlined financial management practice, it is possible to ensure that there are sufficient funds available for the company at any stage of its operations. 6

Importance of Financial Management Availability of sufficient funds Maintaining a balance between income and expenses to ensure financial stability Ensuring efficient and high ROI Creating and executing business growth and expansion plans Safeguarding the organization against market uncertainties through ensuring buffer funds 7

Scope of Financial Management Financial management in a company is governed by the principle that it must protect the financial interests of the investors, shareholders, and ensure business growth. Apart from securing their interests, the financial managers are also expected to ensure greater ROI that generates more wealth for all shareholders. 8

Scope of Financial Management There are certain objectives of financial management which are universally accepted by experts and business leaders, and these clearly outline the financial management scope and functions. 9

Objectives of Financial Management Assessing Capital Needs Financial managers need to evaluate factors such as cost of current and fixed assets, cost of marketing, need for buffer capital, long- term operation and human resources cost etc. Successful businesses have clearly defined short-term and long-term financial requirement projections in place. 10

Objectives of Financial Management Determination of Capital Structure A company s capital structure is the framework that determines decisions such as debt-equity ratio in the short as well as long term. Creation of Effective Financial Policies There is a need to frame efficient financial policies that govern cash control, the lending and borrowing processes and so on. 11

Objectives of Financial Management Resource Optimization Great financial managers are able to navigate through different scenarios by making optimum use of the available financial resources. This would reduce the cash burn and increase the cash churn to generate maximum ROI. 12

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Functions of Financial Management Fundraising For any business to grow confidently and have a good market reputation, adequate amount of cash and liquidity is critical. Therefore, businesses raise funds by equity or debt financing. 14

Functions of Financial Management Fund Allocation The funds that a company has must be allocated in the best way possible after due diligence on: 1. Business size and growth potential 2. Whether the assets are short-term or long- term before spending on them 3. Mode of fund raising 15

Functions of Financial Management Profit Planning Unless it is a social organization, earning more profits would be among any business s primary goals. The profits a company makes, determines its financial health and future growth. 16

Functions of Financial Management Understanding Capital Markets A company s shares are publicly traded on stock exchanges, and the transactions as well as the change in a listed company s market capital is a constant phenomenon. Good financial managers have to be well-versed with the capital market dynamics, and the risks associated. 17

Financial Planning Financial planners are in high demand these days. Individuals as well as companies are availing the services of financial planners to optimize their investments and savings, to ensure future financial safety. Financial planners need to be experts in analysing financial statements, income flows, expenses, and creating a customized solution that matches a client s needs 18

Financial Planning There are various segments of financial planning such as wealth management, tax planning, retirement planning, investments etc. The aspirants can work as self-employed financial planners, launch a financial planning startup or work in businesses such as the Knowledge Process Outsourcing (KPOs), NBFCs, Asset Management Companies (AMCs), or wealth management and financial services companies. 19

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