Financial management is the way in which an organization or individual anticipates, manages, and controls its financial resources. This implies skills in interpreting what the numbers of a budget say about a company’s performance and where to go next. The budgeting and financial forecasting in Herndon involves analyzing and communicating performance information and determining where to proceed financially. In order to understand financial management, one must know the four key elements of financial management.
We will now see into the 5 key elements of financial management.
Planning is essential in financial management as it helps to measure performance and improvements against prior results. A business should have a proper finance plan whereby it aims to improve its financial position. To have a proper budget, a business usually needs to gather information and compare different amounts of previous budgets with its current situation. This way the business should make a proper plan to achieve the desired results.
Controlling is a process of tracking the progress of the organization to meet its targets. It helps to make sure that budgeted objectives are met. An organization must have effective control to achieve a higher level of business performance.
Financial controls involve checking the financial results against the budget. This type of control helps to identify any deviation from planned amounts and also decreases the costs, which can be cut down before they become too large.
- Organizing and directing
Organizing and directing are the most important tasks in financial management. Managers must have a clear overview of the organization’s performance and should use this information to direct individual efforts to get better results. A structure should be put in place that will allow managers to take decisions quickly.
- Decision making
Decision-making is a key element of financial management. Without taking decisions, there will not be any achievement of goals. A manager should be able to make decisions as quickly as possible and ensure that a solution is found for every problem.
Decision-making should be based on facts to ensure that the most appropriate solution is found. It involves selecting an option from a range of viable courses of action and assessing its short-term and long-term effects in order to achieve the desired result.
- Implementing financial plans
Implementing financial plans involves preparing a schedule for the money and activities to be done in order to obtain the desired results. With the changes in market conditions, managers should adjust their plans, as well.