Finance management across Businesses: Why is it important?

When capital is the life blood of all businesses, how can finance management not be a part of it? The title of the article is well justified with the previous sentence. Finance can be referred as the science of capital or money management. The process of managing money including investment to financial decision making, is finance management. Finance management majorly focuses on three activities: planning, controlling and decision making in and around finance. Here, planning means the plan for acquisition of money for running a business and managing funding throughout. Controlling aims at effective use of money for businesses. On the other hand, financial decision making is the most important part of finance management. Right from deciding the investors to deciding on investing on projects and products, every decision is crucial for business and comes under financial management. All these aspects are essential part of every business across industries. The business scenarios might vary but presence of financial management is always felt in every business. Let’s have a look at finance management, its implementation and importance across industries.

Finance Management in Small Scale Businesses
For any start-up or small business, acquisition of money is one of the biggest concerns. Till a business gets stable, the decision of where and how to acquire funding remains the most prior concern. This involves financial planning and decision making, the two most integral parts of financial management. Besides, financial controlling too plays a major role in small scale businesses. Unlike bigger companies, every step that involves money is crucial with small companies. From managing salary scale to employee benefits and from product launch to marketing activities, every aspect is confined with an amount which is again assigned after proper planning. There is less scope of expanding finances for processes in small business and therefore, the need for crisp finance management is even more important.

Finance Management in Medium Scale Businesses
Medium scale businesses are quite balanced as compared to small scale businesses and large scale businesses. The funds are already raised and therefore one of the risks related to funding is minimized. However, financial planning and controlling is still involved. For medium type businesses, financial planning is either done yearly or half-yearly; also at times quarterly. The entire business plan and the capital to be invested are decided on an early basis. With medium scale businesses, for launching new products and process and employee benefits, capital can be expanded. But the expansion does involve future planning and revenue analysis.

Finance Management in Large Scale Businesses
Finance management in large scale businesses is very different from that of small and medium scale businesses. These are companies that have been established in the market and are growing companies. Therefore, there is less risks involved with financial crisis. The financial planning involved is similar as previous years with slight differences here and there. They are open to financial investment for new launches and give priority for involving finances for employee benefits. Also, as the business level and scale is big, financial planning and controlling involves tedious task lists. These are how finance is managed in different types of businesses across industries. Irrespective of the approach of management implemented, financial management remains important for every business. Some of the reasons that validate the importance of financial management in diverse industries are mentioned as below.

Importance of Financial Management in Businesses

  • Proper track of an organization’s financial status through accounting and finance reports. Through such reports, one can evaluate expenses and revenue and plan for the future with a better hand.
  • Competitive research becomes handy with financial management. Every organization goes through competitive research for better planning and results and organized management of finances help in doing the same.
  • Highs and lows are integral parts of the business world. In both the situations, financial management helps one to evaluate and test the changes that took place in the business in terms of expenses and revenue.
  • Financial management helps in evaluating risks and benefits in a business. Both the aspects are easy to manage a business.
  • Financial management includes a lot of balance sheets and reporting. One can build better finance strategies for a business in future through balance sheets and reports created during financial management process.

Financial management thus becomes an important part of business across industries. It not just help in reviewing financial statements at the end of the year but help you stay updated with all the expenses going on within the business and thus ensuring zero capital waste. Also, it helps in better business planning and as known to all, no business can strive without proper planning.

Learn from Industry Experts with free Masterclasses

  • Financial Modeling statistical functions in Excel

    Finance Management

    Financial Modeling statistical functions in Excel

    25th Mar, Wednesday1:00 PM CDT