Future Scope of Financial Management as Career Option in 2022: Financial management is the very specialized part of management that focuses on efficient financial planning for an organization. Unlike the traditional method that was merely limited to fundraising, in the modern corporate world, the finance department is responsible for the organization, strategic planning, direction, and control of financial undertakings in a company or an enterprise. It also involves fiscal management and inventing the management principles for an organization’s financial assets.
With the support of ERP software and finance management system with functions such as accounting information system, asset management, and revenue recognition, financial management permits the company with a long-term insight. This business insight helps in vital decision-making on matters pertaining to investment, profitability, liquidity, and business expansion.
Financial managers are extremely insightful and skilled corporate finance experts who maintain the financial health of an organization. This is achieved by creating financial reports, planning and tracking investments, developing financial strategies, and designing short and long-term financial goals.
Scope of Financial Management
For a sound fiscal implementation in a company or an organization, financial management plays a dynamic role. From strategizing the capital structure, capital budgeting, dividend structure, and scenario planning to vital decision making such as mergers, acquisitions, franchising, and business growth – financial management is the backbone that manages the fundamental resource, i.e., Capital.
Finance management also manages budget allocation to each department and principals the way for the entire organization to meet the short and long-term financial goals.
Nature of Financial Management
Financial Management demands main attention on wealth maximization, applying financial management values to manage the company’s financial resources or the organization.
Financial Management has a centralized and comprehensive nature with administrator functions. It is the mainstay of commerce and industry as it basically includes a risk-return trade-off. Risk management is too one of the dynamic functions of financial management.
The Nature of Financial Management can be explained as
1. Capital Requirement Estimation
Anticipating fund requirements can be one of the most vital features of financial management. Specialized finance managers estimate the capital requirement for a company or a project and prepare the budget considering all incomes and expenses. Correct cost estimates are vital for the survival and success of a project or a company.
2. Capital Structuring
Ideal capital structure needs vital decision-making about securities subdivisional proportion and combination of equity and debt. The correct balance among debt securities, equity securities, derivative, and hybrid securities reduces the cost of capital.
3. Funding Source Selection
When it comes to selecting the source of funds, financial management again plays a dynamic role in defining the suitable sources, including owner investment, issuing of shares, bonds and debentures, venture capital, retained income, etc. The principle behind selecting the funding source mostly sticks to capital cost reduction, low-risk involvement, and convenience.
4. Raising Shareholder Value
To increase the overall value of shareholders, financial management works on cost reduction and profit maximization to rise return on investment to shareholders. Finance management focuses on not only fundraising but also fund investments on behalf of the company they work for, not only for the company’s profits but also for the shareholders who have devoted in their company.
5. Cash Management
The complete cash inflows and outflows are tracked, monitored, and managed by financial management. This balances the cash surplus and deficit for the profit and financial security of an organization. Cost overrun is one of the primary reasons of project failure, and financial management efficiently maintains sufficient cash flow and reduces liabilities to meet the short and long-term financial goals and responsibilities.
Scope of Financial Management
To know the scope of financial management, these below-mentioned factors are the vital decisions taken by the financial management. It is valid in finance and non-finance institutes, stock markets, ministries, corporate houses, etc.
1. Investment Decisions
Financial managers are responsible for selecting the correct set of investments for an organization. Short-term investment decisions are linked to fund provision in current assets in the short run. Investment decisions in the long-term are investment proposal selection based on many financial factors and is often referred to as Capital Budgeting.
2. Financing Decisions
Another vital decision that comes under the possibility of Financial Management is the financing decision. Finance management is accountable for raising the capital for the company. Correct from designing the company’s capital structure and selecting the funding source to accomplish the process, the financial manager takes the company’s financing decisions.
3. Liquidity Decisions
When it comes to productivity and access to capital, financial management confirms that the company’s assets and securities continue liquid, i.e., available to the management as and when required. Finance managers confirm effective management of current asset investment and protect the company against illiquidity risks.
4. Dividend Decisions
The financial manager chooses the profit distribution policy for the company. Whether the company selects to distribute the revenue among shareholders in the form of dividends or focuses on profit retention, financial management plays a pivotal decision-making role.