Many people would expect starting a business to be very easy. With a product or service to sell and enough knowledge to market it properly, many people think that they are ready to go. Starting a business, however, takes more than just products or services and simple knowledge. It takes much more if you want to make your business grow.
At the very start of the business, owners or shareholders will instantly be faced with financial matters that require financial decisions. Questions such as what assets to invest in and where to get the cash needed for such investments would require financial know-how. And as the business venture thrives, shareholders have to manage daily finances and make long-term financial decisions. All of this definitely requires more than just a little knowledge in business. It requires knowledge in an entirely different area – the area of financial management.
Defined, financial management is the process of planning financial decisions with the ultimate goal of maximizing the stockholders’ wealth. In the world of finance, financial management is also known by other names like corporate finance, business finance, and managerial finance.
While the ultimate goal of financial management is clear “maximizing stockholder’s wealth,” the path leading to this ultimate goal is paved with other small goals. Goals like day-to-day profitability and properly managing daily finances are generally regarded as short-term goals, and achieving these goals belongs to the realm of short-term financial management. Aside from these, financial management also tackles other long-term goals, including business profitability and viability.
Achieving the goals of financial management, both long term and short term, involves a lot of processes and activities. These usually include cash management, financial risk management, financial accounting, managerial accounting, and others.
Now, these may sound like a multitude of tasks, especially for businessmen who are only managing small businesses. With the many financial management software products available, however, handling all of these tasks may become easier. Alternatively, businessmen may avail themselves of the services of a financial manager or seek the aid of companies providing financial management services.