The great guide to financial management

Financial management is essential to the smooth running of a business. It ensures its development and sustainability. Concretely, it consists of analyzing the finances of the structure in order to enable managers to make the right decisions. The level of analysis to be implemented obviously varies depending on the size and status of the structure. But the issues also differ depending on the sector of activity.

To analyze their finances, managers can rely on management software and online tools, or use the services of professionals specializing in the field. To help you take stock of this vast subject, you will find in this file everything you need to know about the missions and specificities of corporate financial management.

Financial management: definition

As its name suggests, financial management is concerned with the finances of the company. It brings together all activities aimed at controlling, planning and optimizing the use of liquidity (money) and assets (goods) within the structure.

on the one hand, to ensure the security of the company , that is to say itssolvency , but also its flexibility, by providing the funds necessary for current operations and the acquisition of equipment, while taking into account the hazards that the organization may face;

on the other hand, to guarantee the profitability of the company and the optimization of its resources in the medium and long term.

What is the main objective of financial management?

In fact, financial management is essential to running the business . It provides company managers with financial information intended to facilitate decision-making. Ultimately, financial management can also be used to revise the company’s strategic objectives , after comparing forecasts and achievements.

How does financial management work?

From expense management to financial control, financial management of a business is a vast subject. It covers many aspects linked to the company’s finances, whether they arise from its activities or from outside (bank loan, financial assistance, use of debt, etc.). Controlling customer risk and supplier relationships are also among the elements to take into account to have good financial management in the company.

Expense and budget management

Financial management of a business first requires tracking expenses to verify that available funds are beingused effectively. To do this, managers generally rely on two accounting documents :

the income statement , in which all the charges (expenses) and income of the company (its activity income) are recorded;

the balance sheet , which lists the company’s assets and liabilities and integrates incoming and outgoing cash flows.

Expenditure management is carried out with regard to a forecast budget mentioning the foreseeable expenses and the expected revenues for the coming financial year. During the year and at the end of the period, analysis of the income statement and balance sheet allows, if necessary, to review the company’s strategy based on the results obtained.

Financial management and business financing

At the start of the activity or in the growth phase, the need for the company to resort to external financing may become necessary. To obtain a bank loan or call on investors, it is then necessary to establish afinancing plan and a forecast budget , generally over 3 years. This roadmap is used to convince your partners to invest in the project.

After obtaining financing, you must have rigorous financial management in order to be able to repay your debt when due, whatever its nature. In certain cases, investors can demand in return for their financial participation a right of inspection or decision-making power over the company’s actions