Financial Management; what you should know.

Financial Management

Brief Overview.

Financial Management refers to the strategic planning, organising, directing, and controlling of financial undertakings in an organisation or an institute. It also includes applying management principles to the financial assets of an organisation, while also playing an important part in fiscal management.

Phillippatus Definition.

Phillippatus gave a concise and good definition as follows; “A Financial Management is concerned with the managerial decisions that results in the acquisition and financing of short and long term credits for the organizations.”

Basic Concepts.

At the basic conceptual level of a financial management, it is simply implying you saving as much money as practicable. In a time as ours, where there are several sources of funding and high expectations for return on investment the aspect of managing these funds becomes very critical and a grand knowledge of financial management most expedient.

The characterization of funds procured from different sources varies in terms of cost, risk, management and control. A smart manager will know that the funds should be procured at minimum cost, at a balanced risk and control factors. This is very important because meeting the expectations of various investors is paramount.

it is however very advisable to always follow a management and good planning strategy which offers great result in financial management. One of the most prominent strategy is the 50: 30: 20 set up.

What is 50:30:20 strategy?

In this model, the 50% of your salary or total in-hand compensation goes toward basic necessity of life. Such as the house utilities, rent, groceries, transport and other essential things.

The other 30% goes into maintaining your lifestyle expenses such as various shopping and dinners, vacations and fun trips.

Then the last 20% is towards the future: Such as mortgage/housing and debt repayment, retirement planning and contributions and other emergencies that may arise anytime etc.

What you should know.

In conclusion, what you should know is that the ultimate primary objectives of financial management are:

  1. Attempting to reduce the cost of finance.
  2. Ensuring sufficient availability of funds for future investment.
  3. Dealing with the planning, organizing, and controlling of financial activities like the procurement and utilization of funds and maintenance a steady operation.

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