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Why is Financial Management and Planning Important for Businesses

Oct 12, 2020

Financial management is one of the primary concerns of any business firm, whether it is big or small. It is among the most important responsibilities of owners and business managers. It is essential to have a proper financial management system in place as it affects profits, cash flow and the overall financial condition of the company. The importance of financial management varies with the cycle which business is in and circumstances surrounding the business operations. During the initial years, a business or a startup may receive fewer cash inflows than outflows. Financial planning and management become essential during this time. As the business grows and expands, more cash-in-hand is required to fund its growth. Planning for these financial needs requires expert assistance.

In everyday business activities, financial management requires moving cash efficiently to keep day to day operations smooth. Payment of bills, salaries and other routine expenditures also require the efficient flow of funds which constitutes financial management. Businesses, small or big, has to provide various reports of its operations to its stakeholders like, government, shareholders, etc. Preparation and procurement of these reports is the job of a financial management professional. Thus, due to the above reasons, financial management becomes a critical component of every business. Every decision of a company is taken looking at the financial position of its operations.