What is good financial management? (with photos)

Financial management consultants work to help companies and individuals make better financial decisions.

Good financial management refers to the various methods and strategies that individuals, organizations or government can employ to facilitate stated goals or achieve desired financial objectives. That is, good financial management includes all applicable practices that help to achieve good financial results. The methods for achieving sound financial management depend on whether the party in question is an individual, a company or organization, or a government entity.

Saving money for rainy days is a common aspect of individual financial management.

Most people make financial decisions in their lives on a daily basis. This type of decision is not just restricted to adults, as even young children make small financial decisions that can be considered good or bad. For example, a child who receives a certain amount of allowance each week must make decisions about what to do with the money. Some of the options might include saving a large percentage of the money, spending all of the money, and investing some of the money so that it pays dividends over time. All of these decisions have their own outcomes, which can include saving enough money for rainy days, being constantly breaking midweek, and having extra income from investment dividends.

Likewise, companies must make sound financial management one of the cornerstones of their business practice in order to properly manage whatever resources they have at their disposal in conjunction with achieving their corporate objectives. For example, a company must have a clearly defined operating budget that will serve as a guide for the entire fiscal year. Such a company must keep careful records of cash inflows and outflows in order to put a tight grip on any potential leaks that could push corporate expenses above the desired budget. Companies may need to borrow money from banks and other financial institutions at some point to carry out large or financially intensive projects. Good financial management practices require that these companies also have a clear plan for the use of the money, as well as the repayment of any loans, to avoid any default.

See also  What is supplier credit? (with photo)

Governments also exhibit the principles of sound financial management by planning annual budgets and allocating resources to different sectors and projects. They must also have financial plans in place to allow for proper accounting of revenue received from various means, including taxes, fines, fees, and other sources of government revenue. These sound financial management practices often mean the difference between a healthy economy and an economy that is not progressing.

Leave a Comment