Almost all businesses go through the cycle of earning and losing money especially during the period of start up. This is when owners see the significance of financial management. During the early stage of starting a business, it is important to have enough money for marketing campaign in order to successfully connect to your market and establish a successful image of your business or service. Once the business is established, owners mus have enough cash to pay employees and suppliers. To avoid the shortage of funds, it is important to have financial projections prior to the ope-rationalization of the business.
As time passes by, a business will grow and mature. Hence, more funds will be needed. A crucial planning and budget is needed. Deciding to whether to get funds internally or borrow from outside such as online cash advances is a decision that must be made by the owner or the manager of the company. In addition, financial managers play a vital role when it comes to seeking funds at the lowest cost of controlling the release of money.
To have a deeper understanding of what financial management is. Financial management is defined as the strategic planning, organizing, and controlling of financial undertakings in a company or management. Specifically, financial management aims to:
-Maintain enough supply of funds for the organisation.
-Ensure shareholders of the organisation to get good returns on their investment.
-Productive and efficient utilization of funds.
-Reach out to investment opportunities to invest in.
Why is FM Important?
Regardless of the type of business that you want to venture in, it is important know the proper financial management. Some other reasons include the following:
- Promote financial planning in companies;
- Helps the company in making critical decisions;
- Increase profitability of organisations;
- Provides economic stability;
- May help in encouraging employees to save money
Two of the most important ways to manage finances will be discussed: Bookkeeping and Financing. Bookkeeping is the method of tracking the everyday financial activities of a company such as daily expenses and sales and compiling the results into reports to identify the profit and loss. This is important because it lets you know whether you are making money, losing money or just break even. Another way is financing. There are some cases where businesses avail some financial support such as business credit cards or business loans. This is necessary when sales is not good and there is a lot of catching up needed.