Financial Management: Definition, Objectives, Functions, Principles, and Technology

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Financial Management Definition Objectives Functions Principles and Technology

Financial Management: Definition, Objectives, Functions, Principles, and Technology

Financial Management Definition Objectives Functions Principles and Technology

Definition of financial management

Finance in a company becomes a strong foundation of a company. Finance is also very risky. If it is not managed properly it will become chaotic and of course it will stop the company. In a company it takes its own field that takes care of the finance department or can also be called financial management.

Financial management is planning, management, storage, and controlling funds and assets owned by a company. Financial management must be planned carefully so that there will be problems in the future.

The purpose of financial management

Financial management must have a clear goal, there are several financial management goals:

Maintain cash flow

In a company, the entry of cash must be monitored continuously so that no spending will occur. As a result, it can cause company losses. Cash money is usually issued to buy raw materials, pay employees, and other expenses.

Maximize company finances

Financial management tasks are not only supervising finance, but also see unfavorable fund budget activities for companies that can be removed and replaced with more beneficial activities of the company.

Prepare a capital structure

Financial managers in planning a capital structure must be able to balance the budget possessed by the funds borrowed by the company.

Maximize profits

The right financial planning will be able to maximize the benefits that are obtained in a long term.

Increase efficiency

By budgeting the right funds in all aspects, the company’s funding efficiency will continue to increase.

Optimizing company wealth

Financial managers must also be able to read the stock market. By providing a profit division as much as possible to shareholders, of course, will increase the company and give the trust of shareholders to continue to invest in the company.

Reduce operational risk

The exact decision made by financial managers will affect the risk of uncertain business at any time.

Ensure the survival of the company’s life

Financial managers play an important role in a company. The right decision will be able to make the company survive in business competition, but otherwise decisions that are not careful will cause a bankrupt company.

Reduce capital costs

Financial managers must make appropriate capital planning, so that capital use can be minimized in such a way.

Financial Management Function that you must know

In addition to the purpose of the above financial managers, financial managers must also have clear functions. Don’t let the financial manager do not have any function and just stand alone. There are several financial manager functions:

1. Planning

Planning finance in a company is very important. Financial planning includes regulating cash, counting profit losses, planning cash flows.

2. Budgeting.

Budgeting is an activity allocating funds for all company needs. This allocation must be done to a minimum and maximize the existing budget.

3. Controlling.

Controlling is to control or evaluate the ongoing finances. Evaluation is done to improve the company’s financial system so that the company can survive.

4. Auditing

Auditing is a financial examination process. The company’s financial examination according to the accounting rules will avoid the occurrence of fraud and corporate fund irregularities.

5 Reporting.

Reporting is reporting financial. Reporting company finance must be implemented openly and transparently in all companies. This report is useful for providing information on the company’s financial condition.

Financial management principle

There are also several financial manager principles that must be applied in every company.


Accountability is the moral and legal obligations contained in a company. So that it can be known where funds are obtained, funds are used for anything, and how companies use the funds. All parties and aspects of the company must know how the funds and authority are used.


The company’s financial system must be carried out consistently, it does not mean that the company may not replace the system that has been running. But with this change indicates the use of unstable funds

Life sustainability

Financial managers must be able to plan finances so that companies can continue to run and live. Finance managers must also have the right financial strategy.


The company must be transparent and open to the company’s finances. Companies must provide information about their activities with interested people. Accurate, complete and neat finance can be accessed easily by every interested manager.

Accounting Standards

The accounting system that applies in each company must be the same. Which means that all accountants around the world can understand and understand the same accounting system.


Reports and financial records must be properly maintained. Financial statements must be made as complete and as accurate as possible.


Companies must be able to manage the company’s finances appropriately. Companies must be able to ensure that budgeted funds can be used in accordance with the previous objectives and financial plans.

Tips for Managing Financial Management

After you know about the function, purpose, and principle of financial managers. We also have to know how effective financial management tips. Here are some appropriate financial management tips.

Separate between personal and financial accounts companies

Many business people still mix personal money and company money. Personal money and companies must be separated, it is useful for measuring the financial situation of the company and avoiding the financial misuse of the company.

Allocate expenses to pay yourself

Even though the company is owned by your own, every month you have to allocate and to pay for yourself which is sure to suit your needs. If you borrow money in the company itself must also be recorded as a debt and must be returned.

Create financial statements

Financial statements are made with the aim of knowing the entry of money and can find out profit and loss of running business.

Make a cash flow projection note

With the records of cash flow projections, the company can find out when to spend funds and when it’s time to receive funds. This note also serves to seek efforts before the company’s finance occurs.

Avoid Money Stay at Employees

Do not let the company money be carried by employees who regulate the company’s finances. It is likely that the money will be used for the personal needs of the employee.

Check stock items

Check stock goods regularly will minimize manipulation. There are often stocked stocks that have been sold unpropriated. So, the funds he should still have must disappear without a clear purpose.

Separate cashiers and accounting

The part that holds cashier must also make its own financial report. Cashier’s money must be reported every day, this is to avoid the potential for data manipulation.

To make it easier for this you can use postal software and accounting to minimize fraud action and make it easier for you to monitor business.


Managing the company’s finances is not as difficult as imagined. The most important thing in financial management in a company is transparency and honesty, given the financial problems in a company very vulnerable to manipulation. For that, do the tips that have been discussed earlier.

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