Financial Management Financial management is the art and ability of money management to handle and manage your financial situations in a responsible manner (Mitchell ) On a personal level , financial management is how you manage your household financial situations . On a business level , financial management is how managers handle the financial concerns and needs of their company . In either situation financial management focuses on and financial independence and achieving your financial goals (or those of your company . Although seldom taught even in affluent families , financial management is certainly one of the [banner_entry_middle]
most important aspects of survival in society . Often , when it is picked up , the education ‘ is achieved in the course of learning other things such as learning a business or by sheer luck . Some parents may stress the importance of managing money , but few parents actually teach it , and it would not be far-fetched to say that relatively few people actually understand what is required to manage finances . Most people who succeed in managing their finances tend to do so by luck
What is involved in financial management ? It involves including planning , investment , credit factors and spending habits . Although these could be viewed as money management , for the most part , the actual task of money management involves how you actually spend and use the money you have . That use affects other aspects of financial management such as your credit , your investment and your investment habits . In business , entrepreneurs and financial managers should fully understand what information top management needs . The most common reason businesses fail is under capitalization , i .e , not starting with enough money to carry it through the growth period . Poor cash flow and inadequate expense control are two other important factors . On a similar note , you need to fully understand your personal and household needs in to manage your personal finances
Big and small businesses have many financial similarities Businesses and entrepreneurs need to have knowledge of both finance and accounting . Both are important . Finance teaches how to use manage your money while accounting allows you to keep track of it . Both go hand in hand , and indeed , it is difficult to manage and use your money effectively if you lose track of it . All businesses should get budget requests from their departments . The capital budget is used for major purchases , the cash budget is used for cash flow and the operating budget determines how much profit your business can expect to make and what to do with the money
As has been pointed out , under capitalization is a major reason businesses fail . This is mostly because businesses need cash to operate and cover their day-to-day operating expenses and costs . Both big and small businesses sometimes need short-term financing to cover the daily operating costs or for emergency situations . If a business pays its bills early but its customers pay late , the business may encounter cash problems . Sources of short-term cash include promissory notes , family and friends , commercial bank loans , factoring and commercial Entrepreneurs can… [banner_entry_footer]
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