Financial Management – 8 Important Scopes

There are eight essential scopes when it comes to financial management, these are:

Financial Planning
Securing Capital Funds
Financial Supervision
Financial Control
Financial Decisions
Preparation Of Annual Financial Statements
Estimation Of Financial Performance
Evaluating the Impact of New Financing
Miscellaneous Functions

1. Financial Planning

The first scope of financial management is financial planning, which is the process of knowing the business’ ideas, goals, and objectives. It is also used to determine the policies and programs to achieve the identified goals. To break it down:

Deciding The Objectives:

The first thing that you need to do is to determine the company’s financial objectives. This will help you identify the fundamental goals for wealth and profit maximization.

Establishing Policies And Procedures:

To define the business’ code of conduct, you will need policies and procedures. These policies will serve as the guidelines while procedures formulate the rules and regulations for your company.

Financial Plan Arrangement:

By arranging your financial plan, it will help you strategize and design a format of capital structure. This format includes:

●Accommodating any future development to keep up with the pace of technological and innovative changes.
●Estimating the actual size of the business’ capital structure.
●Designing the capital structure with different fund sources. The funds can be borrowed or owned.

2. Securing Your Capital Funds

The second scope is securing your capital funds. After designing the capital structure, the next thing that needs to be done is to arrange the funds from different sources such as various institutions or individuals.

3. Financial Supervision

The third scope of financial management is financial supervision, which is firstly monitoring the collection of funds. Once you have selected the primary source of the capital and received it, the capital should be used under these factors:

Maintaining The Level Of Optimum Liquidity

Remember that in every business, the department of finance will be the one monitoring the cash flows, both in and out. This will determine and assume the deficit cash and the surplus cash to reduce the undertows and overflows. This will maintain the level of capital or liquidity of your business.

Establishing An Effective Management Of Assets

Financial supervision is also needed to effectively manage assets and to formulate new techniques for capital budgeting. Once you have established the assets, it’s the company’s responsibility to properly use these fixed assets and to maintain the department of production.

4. Financial Control

The fourth scope is financial control, which is the proper usage of investments in miscellaneous assets. This can be formulated using a budgetary control system which maintains and limits the company’s actual cost.

5. Financial Decisions

The fifth scope is financial decisions that will help maximize the business’ potential and growth. These decisions include investment, financing, and dividend decisions:

Investment

Investment is a decision to be made by top-level management and investors. They will determine the investment opportunities for the company.

Financing

The financing decision is usually made by the financial manager concerning the company’s financial mix. It consists of fund allocation as well as borrowing for investments.

Dividend

The financial manager also handles the divided decision. This manager is responsible for dividing dividends or the company’s profit among the shareholders.

6. Preparing the Annual Financial Statements

The sixth scope is preparing the annual financial statements which are producing a balance sheet and generating a report of the profit and loss. All these aspects will show the company’s condition and its financial reputation during the working period. These financial statements will also show the expenditures and income of the company.

Usually, a financial statement starts from the 1st of April to the 31st of March.

7. Estimated Financial Performance

The seventh scope is the estimated financial performance which is an annual or time-to-time evaluation of the company’s performance. This is an important job for the financial manager and management. The evaluation will include the return on investment (ROI), cost per unit, net profit, and the trend and ratio analysis. All of these are crucial in determining how the company is performing.

8. Evaluation The New Financing’s Impact

The eighth scope is the evaluation of the new financing’s impact. This means that modern management is following objectivity and is becoming future-oriented. The company’s development and time-to-time growth are essential to increase your business’ profits.

9. Miscellaneous Functions

The ninth scope is the miscellaneous functions which mean that finance comes with many functions. These functions include social insurance funds, the safety of securities, gratuity, management of the provident fund, and tax planning.

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