Financial management

Capital structure, determining how to pay for operations and/or growth. If interest rates are low, taking on debt might be the best answer. A company might also seek funding from a private equity firm, consider selling assets like real estate or, where applicable, selling equity.
Working capital management, as discussed above, is making sure there’s enough cash on hand for day-to-day operations, like paying workers and purchasing raw materials for production.

What is an Example of Financial Management?

We’ve covered some examples of financial management in the “functions” section above. Now, let’s cover how they all work together:
Say the CEO of a toothpaste company wants to introduce a new product: toothbrushes. She’ll call on her team to estimate the cost of producing the toothbrushes and the financial manager to determine where those funds should come from—for example, a bank loan.
The financial manager will acquire those funds and ensure they’re allocated to manufacture toothbrushes in the most cost-effective way possible. Assuming the toothbrushes sell well, the financial manager will gather data to help the management team decide whether to put the profits toward producing more toothbrushes, start a line of mouthwashes, pay a dividend to shareholders or take some other action.
Throughout the process, the financial manager will ensure the company has enough cash on hand to pay the new workers producing the toothbrushes. She’ll also analyze whether the company is spending and generating as much money as she estimated when she budgeted for the project.

Financial Management for Startups

At the outset, financial management responsibilities within a startup include making and sticking to a budget that aligns with the business plan, evaluating what to do with profits and making sure your bills get paid and that customers pay you.
As the company grows and adds finance and accounting contractors or staffers, financial management gets more complicated. You need to make sure your employees get paid, with accurate deductions; properly file taxes and financial statements; and watch for errors and fraud.
This all circles back to our opening discussion of balancing strategic and tactical. By building a plan, you can answer the big questions: Are our goods and services profitable? Can we afford to launch a new product or make that hire? What might the coming 12 to 18 months bring for the business?
Solid financial management provides the systems and processes to answer those questions.