Complete Explanation of Company Financial Management

Corporate financial management is similar to personal financial management or management, and the difference is that the company’s financial management is very complex. Starting from obtaining funds, activities using funds, and managing activities.

It is said to be complex because the company’s financial management is related to efforts to obtain the necessary funds at minimum costs and the most favorable terms and to use these funds as efficiently as possible.

Company-owned funds and assets must also be used for things or activities that help achieve profit. So to make this happen requires the involvement of various parties.

In personal or organizational interests, finance is the most crucial aspect, and it is a source of all productive activities that generate profit, especially in an organization. Hence its management must be a priority if the organization is to grow.

Company Financial Management

Quoted from the journal Corporate Financial Management by Dety Mulyanti, financial management is the activity of company owners and management to obtain cheap sources of capital and use them effectively, efficiently, and productively to generate profits.

This consists of planning, budgeting, auditing, managing, controlling, searching, and depositing funds owned by an organization or company.

All of these activities need to be carried out in a disciplined manner by all departments. As a result, companies obtain data to support investment decisions and control liquidity, profitability, cash, and so on.

Its management system incorporates several financial functions, including accounting, fixed asset management, revenue, and payment processing. There are 2 types of management, namely tactical and strategic.

Management of the tactical level includes procedures that govern how to process daily transactions, close monthly finances, and compare actual spending with budgeted money.

Meanwhile, strategic type company financial management includes planning and analysis activities—investment planning by leaders using data and finding opportunities to build a resilient organization.

Financial management in an organization or company is essential because it is used to develop financial strategies to achieve both short and long-term goals.

For example, financial data, over a monthly period, is used to improve promotions by taking advantage of new packaging designs. This is a short-term solution, but the sales profit will be used for long-term plans.

Company financial management is also used in decision-making, controlling, or ensuring each department’s contribution so that the vision and mission of the organization are achieved according to the budget and strategy.

While the purpose of its application in an organization is to maximize profits through up-to-date information, for example, information regarding an increase in the cost of raw materials is used to increase the cost of goods sold.

Then it is also used to track liquidity and cash flow and to ensure that the company complies with all government regulations and develops financial scenarios based on business conditions.

Principles of Corporate Financial Management

There are complex principles in their application in an organization or company because it concerns the common interest, not just individuals or departments. Here are 7 principles in corporate financial management.

1. Consistency

Its application must be consistent from time to time, it cannot be implemented based on internal changes. An inconsistent approach is an indication that there is manipulation in it.

2. Accountability

Accountability is closely related to moral or legal obligations and does not refer to specific individuals, groups, or organizations in proprietary rights granted to third parties. It contains operational, ethical, and legal responsibilities for the company.

3. Transparency

The principle of openness in providing information related to organizational activities. Including providing accurate financial reports, being easily accessible to stakeholders, as well as showing profits.

4. Sustainability

This principle is the financial manager’s responsibility, where the task is to maintain the stability and survival of the organization. A strategy is needed so that the company’s financial condition is secure for the future.

5. Accounting Standards

The implementation of the financial system is aligned with the accounting system. Universally applicable and easily understood by anyone directly or indirectly involved with an organization.

6. Management

The company’s financial management includes general management principles, starting from the kind of cash income and profit, how it will be shared with each department, to how it is used in operations that lead to the achievement of common goals.

7. Integrity

The integrity of financial-related records and reports must be maintained appropriately and organized to be understandable, complete, and accurate. Then it is used as a guideline within a predetermined period before changes are made gradually.

The company’s financial management is essential because it determines whether its operations can run smoothly or not. Financial management is one of the services available at Skha.

Also Read: Definition of Business Strategy, Functions, and Applicable Examples

Skha is a management consulting company that has been operating for 21 years. Visit the Skha advisory & transaction service page and contact us for more info.

Also, learn various updated information in the business world through our article page.

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