Every business goes through the different phases of earning and losing money. This is especially true when the business is in its early stages. As the business grow and mature, more funds will be required. To achieve this, a well-structured plan and budget is must. Since the owner has the power of making any decisions, he/she has to decide whether to get funds internally or borrow from outside such as online cash advances. In this situation, the owner needs to understand the significance of having sound financial management. Building a well-orchestrated strategy ensures that a company maintains positive growth in its finances in order to maximize profit and minimize costs. To plan this strategy, the financial manager plays a pivotal role and helps business owners to improve their existing financial plan or to create a new one. Furthermore, the use of technology in financial management has helped these managers to improve efficiency, performance, and effectiveness of businesses. It has also improved the security of company data and other information which could be used against it.
State of Affairs Globally
In today’s competitive world, business owners face a mountain of challenges while running their business in order to survive and thrive. These challenges include high-interest rates on loans, paying out salaries on time, the spending on IT services and other assets, etc. Hence, financial management can reduce the burden of keeping pace with everything and allow owners to put their focus on more important things. According to PurePoint Financial, 56% of millennials don’t have any money saved in a retirement account. Only 24% of millennials demonstrate basic financial literacy, according to a study from the National Endowment for Financial Education. CPA financial planners conducted a survey to see what their clients were worried about the most, and a staggering 41% reported that running out of cash was their biggest concern. The survey also found that even those with comfortable incomes and net worths still faced significant fears that their coffers would run dry into their twilight years. According to Statista, the private wealth in North America was valued at 90.3 trillion U.S. dollars in 2018 and it was projected to exceed 117 trillion U.S. dollars in 2023.
Importance and Role of Management of the Financial Plan
For entrepreneurs and business owners, managing all the aspects of business is pretty tough. Factors such as the trend of interest rates, fluctuations in currency and product prices, and the threats of non-payment due to several reasons, impact and threaten on the growth of the company. Therefore, crafting a good financial plan is vital because it assists them to make the right decisions that result in maximization of value. Here are some of the ways to get hold of financial stability and growth:
Help companies in the financial planning and acquisition of funds.
Offer assistance in making critical financial decisions.
Increase the overall value of the companies.
Improve the profitability of companies.
Provide economic stability
Help in managing the internal flow of the cash or funds
Objectives of Financial Management
One of the key goals of financial management is to ensure that the clients’ financial state is in good condition and there should be more funds coming in rather than going out. But when it comes to business, the aim gets changed or altered. For the businesses, it is about formulating a strategy for how the funds are spent to see the company’s financial assets return more easily and more than when they left. The other key goals of the financial management are:Craft a calculated plan clearly
Business owners and entrepreneurs have to draft such plans that ensure the company’s growth and success. By drawing up such plans, they can define where and why certain funds are allocated as well as when they should and can be spent or moved. It also helps in making the entire process of evaluation easier and tracks the direction of the money. Financial managers help these businesspersons to create the plan as well as suggest when there is a need to improve or change the existing financial plan.Categorize financial assets
It is the utmost importance to record all the relevant information in systems that can be supervised by management. So, the best move for organizations and individuals is to get help for financial managers who can take advantage of any software and technology to deliver the best results.Increase revenue passively
This is where the role of financial managers increases as they can find the right type of investments and provide a good investment strategy. These two resources aids and provides the best way to grow their client’s profits passively. Maintain transparency in communication
Not everyone knows the different phrases and terms used in finance. A Financial managers’ task is to make them understand this in simple andeasy terms. Some of the key priorities of financial manager include communicating on regularly basis, breaking down any significant steps or changes with clients and partners, such as monthly and quarterly.
What skills are required in financial management?
According to FINRA’s 2015 NFCS survey, only 40% of respondents spent less than they earn. 38% lived paycheck to paycheck, and 18% consistently spent more than they earned. In the same survey, only 39% said they were confident they could come up with $2,000 in an emergency. This shows that only few individuals are capable to manage their finance and rest are going with the flow. They don’t possess the skills required to manage their money. An analytic mind, clear communication, and eager to learn are some of key skills looked-for. Having these skills ensures that the individual is sharp about expenditure as well as keen to learn new things involved in financial management.
Finance in 2020
In the year 2020, there are going to lots of changes. The finance manager is going to act and think like a business entrepreneur. They are going to identify potential opportunities and risks to business. Businesses Also, finance has taken the stewardship of non-financial metrics as well as financial ones. In the end, having sound financial management aids business owners and entrepreneurs to improve their standard of living and finally, keep them financially stress-free. The future is unknown and contains endless possibilities. Therefore, it is better to keep a well-structured financial plan ready before anything happens.
