Financial management

Strategic vs. Tactical Financial Management

On a tactical level, financial management procedures govern how you process daily transactions, perform the monthly financial close, compare actual spending to what’s budgeted and ensure you meet auditor and tax requirements.
On a more strategic level, financial management feeds into vital FP&A (financial planning and analysis) and visioning activities, where finance leaders use data to help line-of-business colleagues plan future investments, spot opportunities and build resilient companies.

Importance of Financial Management

Solid financial management provides the foundation for three pillars of sound fiscal governance:
Strategizing, or identifying what needs to happen financially for the company to achieve its short- and long-term goals. Leaders need insights into current performance for scenario planning, for example.
Decision-making, or helping business leaders decide the best way to execute on plans by providing up-to-date financial reports and data on relevant KPIs.
Controlling, or ensuring each department is contributing to the vision and operating within budget and in alignment with strategy.
With effective financial management, all employees know where the company is headed, and they have visibility into progress.

Objectives of Financial Management

Building on those pillars, financial managers help their companies in a variety of ways, including but not limited to:
Maximizing profits by providing insights on, for example, rising costs of raw materials that might trigger an increase in the cost of goods sold.
Tracking liquidity and cash flow to ensure the company has enough money on hand to meet its obligations.
Ensuring compliance with state, federal and industry-specific regulations.
Developing financial scenarios based on the business’ current state and forecasts that assume a wide range of outcomes based on possible market conditions.