8 Importance Of Financial Management To An Organization
What is Management?
Management can be defined as the process of coordinating, organizing, and administrating a task in order to meet an expected goal. Every human being does it to some extent in everyday life on an individual level while some by virtue of their qualifications, job descriptions, or career part have to do it.
What is financial management?
Financial management is the process of efficiently coordinating, organizing, controlling, and directing all the financial activities and resources of the organization ranging from expenses to cash, profitability, sales, and credit, so as to ensure it’s smooth running.
Part of the job of a manager is to coordinate the activities of the place being managed for optimal results. And one crucial area that has to be well looked at by the manager is the finance of the organization being managed. This is crucial because, if there is no proper management of the finances of the organization, a lot can go wrong.
What is the importance of financial management?
Here are some of the importance of financial management to an organization.
Guidance For Financial Planning
Proper financial management helps organizations to plan properly and make budgets as to what they need, their financial ability and how best to approach or manage certain issues, challenges and goals. Without financial planning, the organization would not be able to do this.
Helps The Organization Know What Exactly It Needs Financially
There is a concept of taking stock to know what an organization has or doesn’t have. This is also done in finance where accounts are balanced and when this is done well, the organization can now be able to specifically point out what it is or how much it is they need to meet up with their goals.
It Makes For Accountability
Good financial management makes for accountability. If there is no system to check what happens to the money that comes into an organization, then everybody and anybody can always decide have a go at the organization’s money and no one will be held accountable for it.
It Makes For Efficiency
Having a financial system makes for better efficiency in your organization because, the result of the work output of your members can now be quantified, at least in terms of financial returns. Thus, if the organization is not meeting up with its tasks or financial aims, then it has to improve its work efficiency.
It Ensures Proper Use Of Funds
When there is no proper financial system in an organization, there can be no accountability as to what its funds were used for. It is free for all and anyone can even deep hands into the organization’s fund. But if there is a proper financial management system, this would not happen as ways to ensure the proper use of funds will be instituted.
It Helps To Cut Down Financial Costs
With a proper financial system, an organization can gage how much it spends monthly and yearly and decide to take steps to cut down the unnecessary expenses that the organization makes where necessary. This way, the organization cuts down financial costs in the organization.
It Boosts The Wealth Of the Organization
With a good financial system, an organization can consistently plan on how to improve its financial ability. A good financial management arrangement will help them cut down unnecessary expenditure, save excess profits and make investments for the future, this will in the long run, boost the wealth and capacity of the organization.
It Shows That An Organization Is Well Managed
No serious organization plays with financial management. It is the number indicator to any observer or potential customer or investor that the organization is well run. Where it does not exist in an organization or is not well run, people will generally not take the organization seriously and will as much as possible, try to avoid having dealings with it.
Finance management is of crucial importance even to the life of an individual talk more of an organization. Poor finance management has led to the downfall of many organizations and to incidences of corruption and mismanagement in others.
For these reasons, it should always be prioritized by all organizations that wish to be successful in their endeavors.
By Gracefield Maxcot
Don’t miss important business articles during the week. Subscribe here to GoDo’s weekly digest for updates