What is Understanding of Financial Management?

Before reading this article further, we invite fellow Career Advice to know and understand the definition of financial management first. Financial management is one thing that is very important to be applied by all individuals, organizations and companies. If financial management is very important, then what is the definition of financial management? Financial management is a form of planning, organizing, directing and controlling financial activities such as, the procurement and utilization of organizational or corporate funds.


Understanding Financial Management According to Experts 

What is the definition of financial management according to experts? In fact, there are many experts who define financial management based on their knowledge and experience, some of which are Grestenberg, James van Horne and Liehman. According to Grestenberg, financial management is how businesses can obtain funds, how they use these funds and how businesses can distribute them. Another expert named James van Horne believes that financial management is all forms of activities related to the acquisition, funding, and processing of assets (assets) that aim for all activities. In addition, Liehman gave his definition of financial management, namely, efforts made to provide funds and use these funds to obtain assets (assets).


Scope of Financial Management

In addition, financial management also has some scope or important elements, colleagues. The first scope of financial management is investment decisions that are included in fixed asset investments, which is also referred to as capital budgeting. Second, the scope of other financial management is financial decisions. The scope of financial management is related to financial improvement of various resources which will later depend on decisions about the type of source, the financing period, the cost of financing and its return. Third, dividend decisions also become one of the scope of financial management where financial managers need to make important decisions regarding the distribution of net income. Because financial management has some of these scopes,


Objectives of Studying Financial Management

Maybe there are Career Advice colleagues who are wondering, what is the purpose of learning financial management? Simply put, the individual must learn this so that he can use and control finances as well as possible . Logically, if financial management activities carried out by individuals alone are very important, especially an organization or company that does involve a lot of the lives of others.


To further convince fellow readers that financial management is very important, here are some financial management goals that we need to know about.

– To ensure that the funds available, both for individuals or organizations, can be managed regularly and fulfill every important need.

– To ensure themselves (individuals) or shareholders (organizations or companies) in order to get a good and equal return on investment.

– To ensure investment security, so that the rate of return can meet the target to be achieved. That way, we can create safe and real investment opportunities .

– To ensure optimal and efficient utilization of funds.

– Finally, the purpose of financial management is to plan a healthy capital structure, so we need to maintain a balance between debt and equity capital.


Benefits of Financial Management

After discussing the notion of financial management, the scope of financial management, and the objectives of financial management, we now invite fellow readers to listen to what are the things that make financial management so important. In other words, we will discuss about what are the benefits of financial management?


At the beginning of this article, we have touted that financial management is very important to be applied by individuals, organizations and companies. Of course, that is not just an ordinary statement. Management has many benefits for our lives, so its role is very important. According to the website isbf dot org dot uk, there are 8 main financial management benefits, where these benefits can be felt by individuals or organizations. Come on, consider the following explanation.


1. Assist Individuals and Organizations in Financial Planning Well.

Every individual or shareholder who implements financial management properly, will surely get this main benefit. As we know that money is a medium of exchange which, if not managed properly, will make it difficult for the owner. So many people say that making money is not an easy activity, but to spend it? Wow, that water runs out like a fast flowing water.


2. Assist Individuals and Organizations in Obtaining Funds.

Having good financial management means that individuals or organizations can make the right efforts to get more funds. Especially by utilizing existing assets (assets) to generate more net income.


3. Assist Individuals and Organizations in Utilizing and Allocating Funds Received or Acquired Effectively.

There are still many individuals who cannot distinguish between needs and desires alone. Therefore, everyone must learn and apply good financial management, so that he can allocate the funds obtained effectively. This also applies to organizations and companies, where an entity must use or allocate existing funds for important matters relating to the progress of the organization or company.


4. Helping Individuals and Organizations Make the Most Important Financial Decisions. 

Financial management can help individuals or organizations in determining things that are indeed very important or urgent to take priority in allocating funds. That way, we are able to determine which are the most important and which can still be ruled out first.


5. Helps Increase Profitability.

In addition, individuals or companies that implement good financial management will be easier to increase the level of profitability to be achieved. When individuals or organizations can manage their money (funds) properly , then they can maximize efforts that can increase expected profitability.


6. Encourage Yourself or Employees to Be Wiser in Planning and Using Money.

Through the application of good financial management, every individual, employee, company owner, and even shareholders will be wiser in planning and allocating their finances. Why is that? Because we become increasingly aware of what can be said as a priority (need) and which parts are still a mere desire.


7. Increase the Overall Value of a Company or Organization.

In terms of organization and company, financial management that is implemented very well will help increase the overall value of the organization or company concerned.


8. Creating Economic Stability.

Last but not least, financial management can help individuals and organizations create a stable economy. So, are you still sure that financial management is very important for our lives?


Now let’s continue to the next discussion, namely, what are some tips we can do so that employees can implement good financial management?


There are so many examples of financial management that we can find in everyday life. One of them is financial management owned by employees who work in organizations or companies. As we discussed earlier in this article that everyone needs to implement good financial management, employees are no exception.


Unfortunately, the main cause of the lack of good financial management for employees is due to their lack of knowledge in managing good finances. In this case, the leader has a big enough role so that his employees can be guided towards a stable and healthy financial condition. Well, here are some tips that can be applied by leaders or companies so that employees are accustomed to having regular and well-organized financial management.


Financial Management Tips for Employees


1. Create an Educational Program about the Importance of Financial Science. 

The first thing we can do, of course, is to educate employees about the importance of financial science or finance. How to? Try to invite speakers from outside to give material about the importance of financial science. Maybe it can take two to three hours of employee time to get this important material. Some important material to convey include, how to set financial goals, avoid and eliminate debt, build good credit, increase the amount of existing savings, and invest carefully. Provide lunch or a small gift at the end of this educational session, so that employees are more eager to learn financial science.


2. Encourage a Culture of Saving in the Work Environment. 

Reducing the cost of daily living will be easier when we work in an environment that supports a thrifty culture. Well, leaders, company owners, CEOs or business people play an important role in this matter. So that your employees become more economical and smarter in financial management, then you need to do some powerful ways. For example, providing a lunch room that integrates with the pantry so that employees are eager to bring lunch from home and eat together in the room. Another way might be to provide tea, coffee, milk, sugar, sweeteners, creamer, and hot water dispensers in the pantry, so employees can brew their own favorite drinks. Yes, instead of buying a coffee maker whose price is quite expensive, this method is far more efficient right?


3. Apply a Flexible Work Schedule.

This is an idea that many leaders of organizations or companies may not dare to apply, because flexible working hours will make it difficult for them to monitor their employees. However, this is actually a good idea if the leader really wants to teach the importance of financial management to his employees.


Try to imagine employees who come to the office every day at the same time. Say, from 8 to 5 pm. Some employees may have to pay child care fees when leaving the child in the morning or spend other extra costs to get to the office on time.


By applying flexible working hours, female employees may be able to divide time to care for children with their husbands without having to pay for child care, or use public transportation which is cheaper because it is not rushed with time. Of course this suggestion must be adjusted to the characteristics and culture of the company.


4. Apply the Casual Dress Code.

Believe it or not, the dress code or dress code applied by an organization or company can also determine the financial management of employees, colleagues. Using a layered dress code such as shirts, skirts or pants and suits every day has required employees to constantly buy new work clothes. Why? Because if the clothes that are used are all that, surely the customer or client can eventually “hurt the eyes” or assume that employees do not care about their clothing style.


The solution, if it is felt our employees do not meet with clients too often, especially face-to-face, then we can apply casual dress codes but still look professional. This dress code is also often referred to as smart casual. That way, employees don’t need to bother buying new work clothes every month.


Now after reading this article, we sincerely hope that Career Advice colleagues have broader insights into financial management, and can even explain matters relating to financial management as well.


Through this article, fellow readers don’t need to bother to read very thick financial management papers. Simply read our article and get more insight into financial management. So are your fellow readers ready to apply financial management to your personal and organizational life? If you are ready, congratulations to apply it, fellow Career Advice.


by Abdullah Sam
I’m a teacher, researcher and writer. I write about study subjects to improve the learning of college and university students. I write top Quality study notes Mostly, Tech, Games, Education, And Solutions/Tips and Tricks. I am a person who helps students to acquire knowledge, competence or virtue.

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