Functions of Financial Management

Financial management is the branch of finance which deals with the management and operations related aspect by using various financial concepts and techniques. Given below are the various functions of financial management –

  1. Financial planning – Finance management involves lot of planning like estimation of capital which is required by the company for a particular project and then deciding about the various sources from which these funds would be raised, so for example a firm having higher debt would be looking for raising capital through equity issue because a higher debt would mean less chances of getting loan from banks or financial institutions as there is limit to which company can take debt or a company which does not want to do equity dilution would rather prefer preference issue or debentures.
  2. Control – After the planning function, next important task is to see that the company is in course for meeting the goals which is set out in the budget and also completing the various projects on time because many organizations fail due to lack of coordination resulting in delay in projects which leads to project cost going way higher than originally planned.
  3. Cash Management – Many people think that cash is king which is right too but for a company idle cash is similar to liability and that is why management of cash is very important, either it should be distributed to shareholders as dividend or invested into profitable projects so that company can earn higher profits in coming years.
  4. Relationship – It also involves marinating cordial relationship with various individuals or group of individuals which are dealing with company, these individuals include employees of the company, creditors, shareholders, government organizations and so on.
  5. Negotiation– It also involves negotiation with banks and financial institutions with respect to lowering the rate of interest on loans, with creditors to give more credit period, additional sources of finance and other such negotiations.
  6. Routine Functions – Apart from above there are many day to day activities like maintain proper records with respect to cash and documents related to finance, reporting the various activities to top management, coordinating with other departments like marketing, manufacturing, purchasing etc…., safeguarding of various financial asset and so on.


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