Whether you run a small business or large, one thing you have to focus majorly on is financial management. As a company, you maintain various financial related activities such as hiring employees, loan approval, credit lines, building customer’s relationship, making company’s credit rating, adjustment in budget, managing cash inflow & outflow, risk management, etc. Well, all these activities are managed based on the type of financial management. Let me tell you that managing financial activities become important when you are into digital marketing. In fact, a great financial report of any organization mostly depends on how various types of financial management decisions. Do you know the types of financial management you can undertake for managing your finance? If no, then this article is for you.
Here I will talk about different types of financial management you can use for managing your financial records of the business. So let’s make a start now.
Different types of financial management you must consider for managing company’s finance
– Working capital management
So the first type of financial management talks about the bookkeeping methodology and accounting strategies that keep track of your current assets, cash flow, working capital ratio, turnover ratio, current liabilities, etc. If you’re using working capital management to maintain your finance then you can easily ensure the organization and keep up adequate liquid cash to meet its short-term debts and operational cost. In fact, a team is required here to manage company’s operational cycle and improve the company’s earnings in future.
– Treasure and capital budget management
Another type you have in the list is treasure and capital budget management. This involves in planning process which helps you decide if a company’s fixed assets (new machinery, new plant) are worth of allocating funds via the organizational capitalization structure such as capital earnings, debt, etc. What strategies come in capital budgeting? Payback period, profitability index, real option valuation, net present value, accounting rate of return, internal rate of return, etc. As a business, if you’re into raising funds then this type will work best for you.
– Capital structure management
Next type you have is capital structure management. It is a process where a company manages finances through a mix of debt or equity securities. Debt financing are bond issues, and equity comes from retained earnings or a stock. Moreover, working capital is a major aspect of the capital structure. So financial management team will be responsible for managing capital structure of a company’s short-term debts, equities, long-term debts, preferred stock, and more. In fact, company’s debt equity ratio tells how healthy an organization is financially and how risky it is.
– Insurance and risk management
Well, this is not such a major type of financial management like above three, still this is worth considering. You would know that insurance minimizes the risk of an organization. There are some risk management teams that are responsible for reducing the company’s risk factors, which they consider are threat for their business operations. For instance, natural calamity like flood, tsunami, fire, etc. Maintaining insurance of your company in advance reduces the risk during natural disaster and helps you cope up any affect. Therefore, you have to consider taking a good plan providing you right benefits and proper protection amount to limit the company’s threats against risk or lawsuit.
– Financial planning, examine and control management
Like fourth point, this is also minor financial management type. Here it talks about how a business will accomplish its key objectives and targets. Seldom, most companies make a financial plan once their mission is set. Certainly, financial planning helps you achieve your business goals and objectives in future. With the help of it, you can easily analyse business performance, budgets, projects, and other finance related matters to decide business’ stability and performance. You can also check regular financial management to see whether a company is steady, liquid or sufficient to permit any investment in future.
Did you understand the different types of financial management?
There is no doubt that every business differs and has different goals and ideas including unique style and performance. But one thing which is same for every business is ‘finance’ because finance is crucial that determines the success of any business. Without having proper management on finance, you can’t run your business successfully. Therefore, I have mentioned different types of financial management which you must follow to achieve your business goals.
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