IMPORTANCE OF FINANCIAL MANAGEMENT

 IMPORTANCE OF FINANCIAL MANAGEMENT

Importance of Financial Management cannot be over-emphasized. It is, indeed, the key to successful business operations. Without proper administration of finance, no business enterprise can reach its full potentials for growth and success. Money is to an enterprise, what oil is to an engine.

Financial management is all about planning investment, funding the investment, monitoring expenses against budget and managing gains from the investments. Financial management means management of all matters related to an organization’s finances.

The best way to demonstrate the importance of good financial management is to describe some of the tasks that it involves:-

• Taking care not to over-invest in fixed assets

• Balancing cash-outflow with cash-inflows

• Ensuring that there is a sufficient level of short-term working capital

• Setting sales revenue targets that will deliver growth

• Increasing gross profit by setting the correct pricing for products or services

• Controlling the level of general and administrative expenses by finding more cost- efficient ways of running the day-to-day business operations, and

• Tax planning that will minimize the taxes a business has to pay.