Let’s start first with the following couple of questions that everyone asks when we discuss what is financial management about?

• What are Financial Managers?
• What is the role of Financial Managers?

Financial Managers have to practice a very dynamic role that is influenced by the increasing impact of external factors. Hence, It includes corporate competition, technological changes, uncertain Inflation, and Interest rates, the worldwide economic environment, fluctuating exchange rates, changes in laws, environmental concerns, etc. regarding financial dealings. They have to deal with aforesaid factors on daily basis. As a result, strategic vitality and the role of finance are required within the organizations. Financial managers play the role of team players within the overall effort of the company to create value. As a financial manager, one has to be flexible enough to adapt to the changing environment in order to keep its firm surviving.

In other words, financial managers make decisions that can impact the company’s vital indicators. Therefore, in financial management, financial managers practice correct decision-making that involves keeping track of traditional performance metrics and supplement them with new methods that encourage a greater role of uncertainty and assumptions.

If you aim to become a financial manager then your ability to manage, raise funds, invest, and flexibility to adapt to change will affect your firm’s profitability. It will also have an impact on the overall economy. Therefore, misallocations of resources should be avoided to achieve optimal growth in an economy. Thus, through effective and efficiently acquiring, financing, and managing assets, the financial managers play a significant role by contributing to the firm and growth of the economy.

Financial Managers Job Description

The financial managers job description given hereunder in brief;

• Analyze and monitor financial activities and operations daily like payroll, invoicing, and other financial transactions.
• Undertake strategic planning and analysis to facilitate ongoing corporate strategy.
• Propose long-term business plans and manage budgets based on reports.
• Develop financial models & statements related. For instance, account receivables/Payables, budgets, expenses, etc.
• Risk assessments and develop strategies to minimize financial risk.
• Preparing and interpreting management reporting on a monthly, quarterly, and yearly basis.
• Provide advice and guide top management and stakeholders regarding future financial strategy and plans.
• Participate in data analysis, financial modeling, and research for top management.
• Streamline the impact of major business decisions on the success of the organization.
• Perform plans and projects analysis. Also, Scrutinize ad-hoc requests.
• Prepare financial forecasts and investigate ways to improve profit margins.
• Analyze business opportunities for expansion, mergers, and acquisitions.
• Manage the organization’s system of monitoring, reporting, and financial accounting.
• Ensure compliance with policies and regulatory requirements.

Definition Financial Management

What does financial management do? This is a very common question asked from the individuals who are performing financial managers’ jobs. Therefore, the answer to this question is in the following definition;

“Financial management deals with the acquisition of assets, financing of assets and management of assets with an overall goal in mind”.

Let’s briefly discuss the aforesaid three decisions that explain what’s financial management about?

Investment Decision

This is the most important of the three decisions when we discuss value creation in financial management. Firstly, the financial manager’s job is to determine the total amount of assets needed by the firm. If you imagine a firm’s balance sheet for a while and picture the liabilities and owner’s equity on the left side and assets on the right side of the balance sheet. Therefore, financial managers decide about the composition of assets and determine the size of the firm. For example;

• How much of the assets should be held in cash and inventory?
• Which assets require investment and disinvestment?
• Which assets are no longer justified economically?

Financing Decision

This is the second major decision that financial managers accomplish in the process of efficient financial management. So, they are concerned with the right-hand side of the balance sheet to decide about the mix of financing. They address the following questions;

• Can the proposed type of financing make a difference?
• Can the decided mix of financing be the best?
• How the dividend policy affect a firm’s financing decisions?
• What are the best possible ways to acquire needed funds for the short and long term?

Asset Management Decision

Once the decision of the asset has been made and the financing mix has been decided. The assets of the firm also need efficient management. This is the third important decision that financial managers make to operate responsibly over existing assets. Moreover, Financial managers are more inclined towards the management of current assets than fixed assets. Financial Managers are of the view that a large share of responsibility would reside with operating managers.

Personal Financial Management

Personal Financial Management simply means gaining a proper understanding of your financial health to make the most of your income and assets in your daily. In addition, It helps you to plan for your future and to keep an eye on your spending, savings, and investments. Therefore, efficient personal financial management can help increase passive income from multiple investments and income streams. This can lead to a better standard of living, economic prosperity, and peace of mind.