Financial Management Essential Part Financial Planning

Financial management is all about planning and utilizing the available capital for running the Enterprise. It is using your funds expeditiously to earn maximum profits from the business. There are three different types of financial management like capital budgeting, capital structure and working capital management says Ilan Korchmar. The importance of financial management is investment done in the right direction by proper financial planning which is the integral part of the business you are doing.

The major goal of financial management is return on the investments by means of right financial planning. Proper monitoring of the finances must be taken to ensure the objectives you have set. According to the London school of economic, financial management is one of the major aspects in business. One ought to have complete grasp on the financial management to run a successful business. Financial planning is a process of calculation of the funds needed to start an Enterprise and then determining its allocation.


Financial Management is further divided into the following set of the components that are under mentioned.

Financial Reporting: The first aspect of financial management is the financial reporting. It is orderly reporting of all the financial results to get a proper overview of the financial reporting system. The reporting should be free from any discrepancy and misinterpretation otherwise it will render the whole financial reporting of the organization as void.

Accounting Records and Source Documentation: Determine the source of information from the accounting records. As to where the source of record has arisen and if the record is from a reliable source. The records should be capable of verification and should be accountable on the person who is making them.

Internal Control: Next important aspect is the internal control system, which should be very efficient. An effective internal control system leads to proper financial management and which in turn leads to better financial planning. All the companies aim at having an efficient and well controlled system comprising of the auditor and other officials to keep the internal control system intact says Ilan Korchmar.

Budget Control: Another important aspect of the financial management and financial planning is the control of budget. The whole financial structure gets sorted if the budget is on line with the planned budget if any deviation arises, it should be rectifies.

Cash Management: Next component is the management of the most liquid resource of the company that is the cash management. Proper management of cash leads to proper liquidity management which is very vital aspect in the working of the firm says Ilan Korchmar.

Compliance: Compliance management in the financial management includes the compliance with all the applicable rules and responsibility in the organization. That is adhering to the laws of the country and following proper accounting practices so that there is no breaking of rules.

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