What is Financial Management?

What is Financial Management?
At its core, financial management is the practice of making a business plan and then ensuring all departments stay on track. Solid financial management enables the CFO or VP of finance to provide data that supports creation of a long-range vision, informs decisions on where to invest, and yields insights on how to fund those investments, liquidity, profitability, cash runway and more.
ERP software can help finance teams achieve these goals: A financial management system combines several financial functions, such as accounting, fixed-asset management, revenue recognition and payment processing. By integrating these key components, a financial management system ensures real-time visibility into the financial state of a company while facilitating day-to-day operations, like period-end close processes.
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.
Let’s look at both angles.
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.