Financial Management: Definition, Purpose, Benefits and Functions in the Company

Management consists of many activities to set goals by integrating knowledge and skills of employees. Management's role is to control all sectors as the functions and objectives to be achieved are aligned. Planning, organizing and controlling requires management, this also applies to financial management in a company.

Financial management is the main pillar of a company's operations, because all existing systems within the company involve financial management. 

Definition of Financial Management

The Big Indonesian Dictionary (KBBI) defines management as the effective use of resources and finance as a matter of money. Financial management according to James C. Van Horne is all activities related to the acquisition, financing and management of assets with an overall goal.

Financial management has a scope covering investment decisions, financing decisions and decisions on managing the value of assets within the company. Many considerations need to be made in the company's financial management.

Financial management performs its function on the company's financial functions so that the allocated funds can achieve the objectives of the budget planning design that has been formed.

Corporate Financial Management Objectives

Financial management aims to use the company's funds efficiently and effectively. The following are the objectives of the company's financial management in assessing this efficiency:

• Maximize the comfort of the stakeholders and company value.
• Maximizing the selling price of companies that have not go-public .
• Termination of the allocation of funds in investment.
• Form a policy in determining the proportion of the company's profits that will be distributed to stakeholders.

Benefits of Corporate Financial Management

Financial management in companies has various benefits, these include:

• There is a list of income and expenditure plans regarding activities to be held within a clear period of time.
• Details of expenses and income that are regulated in financial management will make it easier to follow up on financial planning in the future.
• Knowing how to allocate company funds optimally with minimal risk.
• Company-owned funds will be safer through evaluation and improvement of the company's financial use system.
• Facilitate the implementation of the company's internal audit.

Financial Management Functions in the Company

Financial management has three main functions in the company:

• Activities using funds, activities to invest funds in various assets with allocations in the form of pieces of paper equivalent to market value such as stocks, certificates of deposit and others.
• Fundraising activities, activities carried out to obtain internal or external sources of company funds.
• Asset management activities, the funds that have been obtained are managed efficiently in the form of assets.

Through an explanation of financial management, we can draw the conclusion that finance, especially in the scope of business, involves good management.

Good financial management will also affect the results of financial reports and how companies can allocate funds more efficiently. Have you done your own financial management well, I hope this information can help you find the answer!