This discipline deals with the management of a company’s financial resources, ensuring its profitability and liquidity.
The scope of financial management within the company is very wide, since it is responsible for the organization, planning, direction and control of its financial resources.
Back to the main characteristics of financial management.
What is financial management?
Financial management has several functions, including:
- Management and decision-making regarding all of the company’s investment activities;
- The management of dividends obtained by the company;
- Ensure the management of the company’s tax charges;
- Ensure the maximization of the profits of the company according to the risks;
- Budgeting and projection of the various activities of the company.
The objectives of these various missions are to ensure adequate maintenance of the company’s resources, so that it can operate correctly within its range of action, while optimally managing the risks with which the company is confronted during each investment.
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What are the 3 main axes of financial management?
First axis: accounting
Accounting is an essential skill for companies, which throughout the year buy from their suppliers, sell to their customers and pay their employees.
All this information is then used to draw up the annual summary documents.
Second axis: corporate finance
This area makes the balance sheet and the income statement speak by providing precise analyzes using the financial diagnosis.
Finance will thus allow the company to maximize its value while limiting the risks.
Corporate finance includes the following activities:
- Activity analysis, using indicators such as the intermediate management balance (SIG);
- Analysis of the financial structure;
- Cash management;
- Evaluation of investment projects;
- Realization of a financing policy.
Third axis: management control
Management control is a strategic decision-making tool, which revolves around 3 main themes:
- Cost analysis;
- Building and managing budgets;
- Setting up dashboards.
What are the characteristics of good financial management?
First of all, to finance a project, it is necessary to take into account its payback period. This, of course, differs depending on the type of project you plan to carry out. Here are some characteristics that good financial management must take into account.
1. A positive financial culture
The operating account, also called the profit and loss account, gives the annual balance sheet of the company’s expenses and turnover (excluding taxes). A positive financial culture would require the company’s cash flow to be in excess, i.e. it should always have surplus resources. Thus, it is important, in order to have good financial management, to be transparent about one’s own methods, about the benefits of the structure and about the very state (positive or not) of the cash flow.
2. Good reflexes with regard to the balance sheet and cash flow
The annual balance sheet plays an essential role in financial management. Indeed, it is he who maintains an image of financial solidity for the company. Good financial management therefore makes it possible to anticipate and avoid cash flow crises.