Financial Management

Financial management seeks to plan for the future such that a personal or business entity has a positive flow of cash.

The term ‘financial management’ has a number of meanings including the administration and maintenance of financial assets. The process of financial management may also include identifying and trying to work around the various risks to which a particular project may be exposed.

Some experts refer to financial management as the science of money management – the primary usage of the term being in the world of financing business activities. However, the process of financial management is important at all levels of human existence, because every entity needs to look after its finances.

From an organizational standpoint, the process of financial management is the process associated with financial planning and financial control. Financial planning seeks to quantify various financial resources available and plan the size and timing of expenditures.

In the business world, this means closely monitoring cash flow. The inflow is the amount of money coming into a particular company, while outflow is the record of the expenditure being made by the company in various sources.


At the corporate level, the main aim of the process of business organization is to achieve the various goals a company sets at a given point of time. Businesses also seek to generate substantial amounts of profits with the help of a particular set of financial processes.

Financial planning aims to boost the levels of resources at their disposal, while also functioning on money invested in them from external investors. Another goal companies have is to provide investors with sufficient amounts of returns on their investments.

At the individual level, financial management mostly involves tailoring expenses as per the financial resources the particular individual has.

Individuals who are in a favorable financial position, with surplus cash on hand or access to funding, plan to either invest their money for a positive return (which normally means that they have made more money after calculating the double impact of tax and inflation) or to spend it on discretionary items.

Financial decision-making is also an important part of the modern day financial management process. The particular entities involved in financial management also need to be able to take the financial decisions that are intended to benefit them in the long run and achieve their financial aims, which is the basic premise of financial management.