Wednesday, May 5, 2010

Maximizing Profits Through Sound Finance Management

The process of finance management

To ensure continuous profits or positive cash flow, finance management or financial management is applied. It is the process of planning for the future of a person or a business. It includes maintenance and administration of financial assets and covers the process of identifying and handling risks. The main concern of finance management is the assessment of financial quantification.

A finance manager analyzes the available data to conclude on the performance of the enterprises. Some refers finance management as the science of money management. It is important at all levels of human existence because every entity needs to look after money. Finance management for a person, means living according to one’s resources, or better below one’s profits and resources. Finance management to a company or business means financial planning and control. It is to see the available funds of the company and plan its spending and the timing of spending. Financial control is to monitor cash flow – inflow and outflow. Managing this movement and relate it to the budget is important in the business.

Purpose of finance management

In both individual and business, the main purpose of financial management is to achieve the individual’s or the business’ financial goals at a given point of time. It is for them to generate substantial amounts of profits, after a particular set of financial processes are done. Finance managers aim to boost resources on hand. They also control the money from external investors and provide profits or returns due to them. The company is most concerned on the later part. Good finance management sees to it that this happens.

Financial management activities

Some of the things to do in financial management is to interpret financial reports like income statements, profit and loss, balance sheets, cash flow statements, etc. It also includes moves like fine-tuning budgets and cost forecasting; allocating how much to make for the company’s revolving capital; looking at options for business expansion either short- or long-term; assess the company’s financial health; decide on techniques whether or not to proceed with an investment and understand valuations for the businesses, portfolios and tangible assets. Either for individual and business concern over profits, finance management is essential to both, in order to meet financial goals and profits, which is why businesses are established in the first place. No one wants to have financial hardships anyway.

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