The process of financial management

Financial management involves planning for the future. The planning may be for a person or a business entity to ensure a positive cash flow. The process involves effective administration and maintenance of various financial assets. Also, identifying and managing risks is an important aspect of financial management.

As mentioned earlier, the process of financial management takes place at two levels. At the individual level, it involves handling expenses according to the financial resources of an individual. Individuals with surplus cash may opt for investing in order to make up for the impact of taxation and inflation. Else, they might just spend it according to their wish. One needs to make financial decisions that prove to be beneficial in the long run and help achieve financial goals.

At the organizational level, the process of financial management is related with financial planning and financial control. Financial planning seeks to quantify various financial resources available to ensure that the necessary funding is available to meet the needs of the business at a particular point of time. Financial control means monitoring cash flow. Managing the movement [inflow & outflow] of funds in relation to the budget is essential for a business.

Key objectives of Financial Management would be as follows -

1. Creating wealth for the business
2. Generating cash
3. Considering the business risks & the resources invested, providing adequate return on investment.

Three key elements of the financial management process are -

1. Financial planning
2. Financial control
3. Financial decision-making