Finance management is imperative for every business
The term finance management can be defined as planning and managing the financial activities of an organisation. The authorities in the finance management will apply the common management principles to the available financial resources of the company and maintain it in the proper manner. The finance management will make sure the proper supply of the funds to the required processes. They will also have an important role in ensuring the safety on investment. They will analyse the profitable asset in the market and suggest the organisation to invest the money so that the organisation can get huge in return.
Role of finance management
The finance managers in the company will estimate the capital requirements of an organisation. The estimation will be based on the expected profit and the future plans of the company. Before allocating funds for any requirements, the managers will confirm that they can get more returns by spending money for that particular purpose. It is because there cannot use the funds for something unnecessarily.
Once after estimating the capital requirement, the authorities will decide the capital structure. In this process, the long term and short term debt equity will also be analysed. However it is based on the amount of equity capital that the company holds and also on the additional funds which are raised from the external parties.
The finance manager has the responsibility in allocating funds for investment in various assets. Investing funds is very important for every organisation because this will give regular returns to the company hence there will not be any financial troubles. Though the company has many customers and gets more profit it is always better to invest money on many things.
The company will have to spend more money for various purposes such as payment to creditors, electricity bill, water bill, stock maintenance, material purchase and most importantly for the payment of salaries and wages. The finance manager will take the responsibility and manage everything properly.
The planning and managing the funds in not only the role of finance managers they should have the control over the company’s funds. It is very easy to plan something and allocate money for that but it will be complicated to make sure that everything is going on in the proper manner. Therefore the finance managers should pay more attention to all the financial aspects and ensure that there are no issues in this department. However the managers will be very responsible in this case and they will take care of everything properly.