What is financial management?
Financial management is an essential pillar in all businesses. If a company has a good financial manager, it will be easier for them to achieve their objectives since they will be able to better manage their resources, ensuring that they are sufficient to cover the costs, so that not only can it continue to function, but also generate profits.
WHAT IS FINANCIAL MANAGEMENT EXACTLY?
The definition of financial management refers to the activity through which the economic resources of a company or institution are managed in a strategic way to guarantee good performance in all its areas.
The financial management department is in charge of managing the items of expenses and income, determining how operations will be financed, deciding where the profits obtained will be invested and developing the financial model that will be applied in the company or institution, all with the aim of creating value.
WHAT DOES A FINANCIAL MANAGER DO?
The financial manager is a key figure in the company as he is in charge of obtaining, using and supervising the funds that will keep the business running and generating profits. This professional performs different tasks in his day to day:
- Prepare the financial model. One of the functions of the financial manager is to develop the financial model of the business based on its current and historical data. This model, which must reflect the company’s situation in a realistic and transparent way, serves to project the financial statements and foresee the consequences of a change in scenario.
- Planning and budgeting. Budgets are essential to maintain healthy accounts as they establish the relationship between expenses and income from the activity of the company. Based on economic indicators, the financial manager must estimate business costs to balance them with profits.
- Manage investment and financing. One of the most important tasks of the financial manager is to develop an investment and asset management policy, finding new opportunities for the company to invest the profits obtained. It is also your responsibility to analyze the different financing methods to choose the most suitable according to the structure, resources and business objectives, so that the business can maintain and expand its activities.
- Evaluate the feasibility of projects. The financial manager is also in charge of analyzing the company’s development projects. You must consider the investment they require, estimate the potential benefits, and decide whether they are economically viable in the short and long term.
- Monitor the use of company resources. The financial manager must also ensure that the company meets its financial obligations, such as payments to workers and suppliers. In addition, you must monitor the financial ratios of the business, analyzing its solvency, liquidity and level of indebtedness to avoid a possible bankruptcy.
- Direct the economy staff. The financial manager can assume the direction of the financial department of the company, so that in his day to day he will have to direct a team of people and participate in the decision-making process, especially those that affect the size and composition of assets, level and structure of funding or dividend policy. Given its leading role, it is not surprising that the salary of a financial manager is around 50,000 euros per year.
- Solve financial problems. Companies operate in changing markets, so it is normal for unforeseen events that demand a restructuring of their plans. The financial manager must evaluate the financial risks, be aware of the economic problems that the business is going through and propose viable solutions to minimize their impact.
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