Financial Management: The soul of business sustainability.

One of the major determinants of the survival of corporate organisation, regardless of the size and purpose, such as; small and medium scale business or large corporations is effective financial management. Central to the principle of financial management is making effective decision regarding the management of money. Hence, managing money can therefore be the root of all major decisions in business management across all business sectors. This therefore means making financial decisions is one of the most important responsibilities of business managers.

Financial sustainability is critical for every business regardless of the business sector, this often than not, guarantees the continuous survival of business even into the future. In order for a business to thrive, its finances and its financial management must be closely evaluated and controlled by top management of the company. If financial management is crucial to business management, what then is financial management?

Financial management is essentially the process of managing money with the view of achieving the goals and objectives of an organization, which is usually the responsibility of chief financial officers or its equivalent in the organization. it requires planning, directing, monitoring and controlling organisational funds in order to make effective financial decisions. In essence, it seeks to apply management principles to the financial structure of a business.

In addition to ensuring the success and profitability of an organization, financial management also ensures;

• Adherence to regulation operating guidelines and principles
• Management of risks
• Aid financial reporting and supply of financial information
• Economic stability
• Maximise profits and stakeholder returns
• Track liquidity and cash flow and financial forecasting

The scope of financial management encompasses every area of the organization, therefore its effectiveness is very essential in decision making. All types of financial decision making have the potentials of impacting the organisation’s assets, liabilities, revenue generation, and profitability. It can impact capital structure and how well a business performs on a broader scale. As such, financial management must focus on both the short-term and long-term objectives of a business. 

Essential fianancial decisions must be must be made in order to support organizational financial wellbeing, including:

• Identification and allocation of resources
• Establishment of procedures
• Asset acquisition
• Fund mobilsation and capital management
• Expenditure management

To achieve these ends, financial management is divided into three main categories of financial decision-making: investment decisions; financing decisions; and dividend decisions.

These categories of financial management will be evaluated in the next publication.