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The Importance of Financial Management Functions and Their Goals in Business

  Financial management is one of the sciences in the field of management related to planning, inspection, control, management, and storage of funds carried out by individuals, organizations, or companies.


If previously financial management only focused on the use and allocation of funds efficiently, over time, financial management also includes other activities, such as how to get funds, the use of funds, and asset management.

The Importance of Financial Management Functions and Their Goals in Business
The Importance of Financial Management Functions and Their Goals in Business



Below is explained more about the importance of financial management that can be seen from the definition, function, to the purpose of financial management.

Understanding Financial Management

Every expert has his own definition of financial management.

The following are a number of definitions of financial management according to experts.

 "Financial management is concerned with the acquisition, funding, and management of assets based on several general objectives." James C. Van Horne and John M. Wachowicz, Jr. in Fundamentals of Financial Management.

"Financial management is the overall activity concerned with the effort to obtain funds and use or allocate those funds." Bambang Riyanto wrote the definition in the book Basics of Company Spending.

"Financial management is the arrangement of financial activities." This understanding is conveyed by Suad Husnan in the book Basics of Financial Management.

"Financial management is a field of business management that aims to be used wisely and a careful selection of capital sources to enable the existence of a unit of expenditure to be able to move beyond achieving goals." J.F. Bradley expressed his views in the book Administrative Financial Management.

In general, it can be concluded that the understanding of financial management is the activities of companies or organizations related to how to obtain working capital funding, use the funds effectively, and manage assets owned to achieve the company's goals.

Financial Management Function


In a company or organization, financial management has a number of functions, namely:

  1. Financial management can be used to draw up income and expense plans and other activities related to a given period.
  2. Make budgeting funds in detail, both in the income and expenditure.
  3. Financial management also serves as financial management. That way, the use of funds can run optimally in various ways.
  4. Financial storage, which is by collecting company funds and storing them safely.
  5. With financial management, the company can find and exploit existing sources of funds for the company's operational activities.
  6. Financial control by evaluating and improving the financial condition of the company and the financial system within the company.
  7. As a financial examination, by conducting an internal audit of the company's finances. That way, there are no irregularities and misuse of funds within the company.
  8. Financial management also serves to provide information about the financial condition of the company. Financial management can be used as an evaluation and improvement material.

Objectives of Financial Management


The goal of financial management is to maximize the value of the company. When one day the company is to be sold, its value can be set as high as possible.

It is the duty of the manager to suppress the flow of money in the company to avoid risks that could harm the company.

The scope of financial management includes:

  • Funding decisions, which include management policies at the time of seeking company funding.
  • Investment decisions, usually a company's investment policy for fixed assets. For example, buildings, tools, soil, and others. Or it could be financial assets in the form of securities such as stocks and bonds.
  • Asset management decisions are a policy to manage the assets owned by the company as efficiently as possible to achieve the company's main objectives.

Financial Management is a Necessity


The existence of financial management is important in the company. Therefore, financial management is needed by every company, regardless of its area of activity. With the management, the company can maximize its business so that it gets maximum profits as well.

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