Principles of Financial Management in the Company
Rancakmedia.com – In this article we will discuss the principles of financial management in a company that you can understand to make it easier for you to manage a company's finances.
The term "financial management" is often used within companies. Financial activities such as financial planning, operations and analysis, as well as financial management and supervision, fall into this category. There are several financial management principles that need to be considered to avoid opaque financial administration.
Financial management involves all activities related to how to receive working capital financing, how to utilize or distribute funds, and how to manage assets owned to achieve the main goal.
In practice, financial management is an activity carried out in order to maintain stability finance company.
Implementing financial management is clearly not a simple thing; it demands principles that can support the management of financial transactions.
What is Corporate Financial Management?
Manage, plan and store company funds; This is what financial management involves. To avoid costly negligence in the future, careful financial management must be carried out.
Financial management must have a solid foundation. because it will collapse if the foundation is weak. It will be difficult to completely rebuild the balance sheet if it fails.
The Purpose Of Company Financial Management
Below are the objectives of the company's financial management, as follows:
Company Financial Management for Effective Use of Funds
One aspect of management company finance is to plan what the funds will be used for. The main goal of this strategy is to efficiently use the funds you have.
You may have a lot of funds for business. But, if you don't use them efficiently, your company won't change much.
This is where you will find out if preparation will bring you many benefits. Your funds are put to good use. And third, it will create significant incentives for the company's growth. Simply put, financial management seeks to help companies grow better.
Company Financial Management to Monitor the Use of Funds
Using money the wrong way causes problems for many funds. Overcoming this is the goal of corporate financial management.
You will find out what the funds are used for, how your company's cash flow is, and the amount owed and receivables. This information will be important for identifying where you will move your company.
Preventing or Reducing the Risk of Misuse of Funds
Employees can misuse company funds if management is not prepared. Or, if there isn't one, you yourself, as the owner of the company, can also make mistakes.
In the end, your company will suffer heavy losses, which may be the start of serious problems and cause you to stop your business. One of the objectives of managing these funds is so that company funds can be spent without errors.
This practice also increases the security of the funds you have. In addition, as mentioned in point 1, you have the ability to make good use of company funds.
Eligibility Reference to Receive Investment
One of the most important goals of corporate financial management is to have a clear financial framework. There is complete data about the use of funds, where you receive them from, and so on. This kind of information is very important if your company is seeking financing from other parties or other businesses.
Other investors will definitely do their due diligence before making a decision to invest in your company, right? Is it safe to put their money into this company? Is this investment profitable or not? Keeping detailed records is the only way to fully understand how your business manages its money.
Don't forget to be honest in providing information that will be used as a standard for making investment decisions. This is very important to gain investors' trust. You will also find it easier to get funding.
Company Financial Management to Prevent Bankruptcy
You will have a better understanding of your company's financial situation if you practice sound financial management. When things are tough for your company, this might be a lifesaver.
You will be able to pinpoint the source of the problem and proceed to resolution more quickly. In other words, you have time to fix problems before they get worse and lead to bigger problems, like going bankrupt.
Function of Implementing Company Financial Management
All activities related to the budget in the company must be carefully planned. Consequently, financial management includes tasks such as financial budgeting and planning (budgeting).
With planning, money can be distributed to the right position and can create optimal profits for the company. Apart from budgeting, there are various other functions as follows.
Controlling
In order to plan future activities, it is important to evaluate how well the budget is being used for each activity.
Examination (auditing)
Internal financial audits need to be carried out so that they are in accordance with accounting regulations and there are no budget deviations.
Reporting
Every year there will be an important financial report to review the ratio of the company's income statement.
Principles of Corporate Financial Management
Carrying out financial management is certainly not an easy thing, it takes sufficient experience and knowledge to be able to apply the right strategy. However, there are seven basic principles in conducting financial management that can be used as a reference.
Accountability
People, groups and businesses have a moral or legal obligation to explain how they obtain their money, funds or power. Have the funds been spent and used? And what is it used for?
Companies must be able to explain to stakeholders and beneficiaries how they have spent their money and what they have done with it. Everyone has the right to know how their tax funds and government authorities are being used in whatever way they see fit.
Consistency
Financial systems and company policies must be consistent over time. This does not mean that the financial system should not be updated if changes occur in the organization. One sign of manipulation in financial management is the different ways in which money is handled.
Survival (Viability)
To keep money from running out, an organization's spending at all levels, from strategic to operational, must be in line with or matched with the money it earns.
Organizational security and financial stability are measured by their survival. The manager of an organization must create a financial plan that shows how the company can achieve its goals and meet its financial needs.
Transparency
Anyone interested in learning more about the company's aims and activities should have access to that information.
This involves preparing financial reports that are accurate, thorough and timely and easily accessible to management and interested beneficiaries. Everything that is hidden in the process of financial administration is characterized by a lack of transparency.
Accounting Standards
The company's financial and accounting systems must follow Indonesian accounting principles and standards. Therefore, accounting methods can be universally accepted and understood by all accountants around the world.
Integrity
In carrying out its operational activities, the personnel involved must have excellent integrity. To ensure that financial reports and records are accurate and complete, financial records must be true and complete.
Management (Stewardship)
Companies must be able to effectively handle and utilize the funds they have received to achieve the funds they have set themselves. Mekari Journal Accounting Software Manages Your Finances
Those are the seven principles of financial management that you need to know. Managing one's finances is not a simple task.
Scope of Corporate Financial Management
The following three things must be considered so that financial management can work:
Funding Decision
This includes management policies in obtaining company funds, for example, policies on issuing a number of bonds and policies on short-term and long-term company debts taken from internal and external companies.
Investation decision
Covers the company's investment strategy in fixed assets, such as buildings, land, and equipment or machinery. This consists of financial assets in the form of securities, such as stocks and bonds, or activities to invest funds in various assets.
Asset Management Decisions
This point consists of several rules for managing assets owned effectively to meet company goals.
FAQs
Below we have summarized some frequently asked questions about financial managers, as follows:
What are the duties of a financial manager?
His duties include coordinating the preparation of the budget, accountability for budget implementation, carrying out financial and advisory administration, compiling accountability reports on budget implementation and fostering financial administration and facilities at the regional secretariat.
Conclusion
The term financial management is often used in companies. Financial activities such as financial planning, operations and analysis are all included in this category.
There are a number of financial management principles that need to be kept in mind to avoid opaque financial administration bureaucracy. Thus the information above hopefully can help you.
This is information about the principles of financial management in companies, I hope the above article can be useful and helpful for all of you.
