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Nature of Financial Management

Byadmin

Aug 23, 2022

 In the modern era, the role of financial management in business has become very important. Is . According to the traditional view, financial management is needed at the time of starting a business, reorganizing, expanding and collecting funds.

According to the modern ideology, financial management is a continuous process, it is not only a plan to obtain funds but also to use them properly. The nature of financial management has been explained by the following points 

(1) Financial management is an integral part of business management. Finance occupies the topmost place in the management and operation of business. Every action of business is associated with money. The production manager is responsible for the purchase of raw materials, labour, business overheads, machines, etc., but the final decisions in this regard are taken only after consultation with the finance manager. Therefore, the finance manager is an active member of the top management. 

 (2) Continuous administrative work: According to modern ideology, financial management is a continuous administrative process. In the present era, it is also the responsibility of the financial manager to collect funds at minimum cost and use them judiciously to run the business successfully. Making long-term capital budget and arranging working capital for day-to-day are also included under financial management. 

(3) Scientific and Analytical In the era of current globalization, the work of financial management has become scientific and analytical. Various options are evaluated before taking any financial decision. For this modern mathematical and statistical methods are used. Financial decisions based on the analysis are implemented in the business. 

 (4) Centralized nature: Finance work is basically centralized in nature. Finance is at the root of all activities like production, marketing, distribution etc. Centralization of finance makes it possible to coordinate and control business operations. 

 (5) Broad sector financial management is directly and indirectly involved in all activities. Therefore, it can be said that the field of financial management is wide and full of complexities. To collect funds to meet short-term and long-term plans, their allocation and optimum utilization also comes under the scope of financial management. Capital planning, budgeting, accounting, cost control, cash and credit management, management of working capital, etc., also have to be completed by financial management. 

 (6) The financial management applicable to all organizations is applicable to all types of institutions such as manufacturing, trading and service institutions. These entities can be of any size, ownership and control.

(7) Different from accounting work: Accounting work is only to keep an account or record of the entire activities of the organization. Whereas the function of financial management is to analyze the accounts and make financial decisions.

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