What is financial management? Definition and examples

Financial management involves organizing, planning, monitoring, and also controlling a company’s, organization’s, or client’s financial resources. In the world of business, the aim is to help the company reach or achieve its goals and objectives. A goal is where you want to be at a given future date, while an objective is a description of how you plan to get there.

Financial Management image for article 49939299292Financial management is one of the most important components of a well-run and successful business. Individuals who plan to set up a startup properly will need to have financial management skills. Those skills are also crucial for the current and future prosperity of any going concern.

Financial management is more than simply managing a company’s finance. It also includes trying to make sure the business succeeds and maximizes profits and shareholder value.

The London School of Business & Finance has the following definition of the term:

“Financial management refers to the strategic planning, organizing, directing, and controlling of financial undertakings in an organization or an institute.”

“It also includes applying management principles to the financial assets of an organization, while also playing an important part in fiscal management.”

Financial management – creating profit

Financial management focuses on making sure a company is profitable. If an entity is profitable, it means that it can make a profit, i.e., more money is coming in than going out.

The term also includes ensuring a good return on investment, which is achieved by setting up and implementing financial controls, making financial decisions, and creating financial plans.


If you plan to set up a startup, you will need to have at least basic financial management skills. Do not look for other people to manage your business’ finances. If you do, your risk of getting into serious financial trouble will increase considerably.

The Free Management Library makes the following comment about basic financial management skills:

“Basic skills in financial management start in the critical areas of cash management and bookkeeping, which should be done according to certain financial controls to ensure integrity in the bookkeeping process.”

“New leaders and managers should soon go on to learn how to generate financial statements (from bookkeeping journals) and analyze those statements to really understand the financial condition of the business.”

Tools for financial management

Without the right tools, streamlining your finances and making the whole business more efficient is extremely difficult. Today, there are many tools available that can help you monitor and track your profits, losses, expenses, and calculate your tax liabilities. Some of these tools are available online free of charge while others charge a fee. Let’s have a look at two of them:

Profit margin calculators

Being able to determine what your profit margins are and will be quickly will help you decide how much your company can afford to spend over the coming year.

Accounting software

Many programs on the market today have been created specifically for small and medium-sized companies. With QuickBooks, for example, a well-known accounting software program for small businesses, you can manage your finances anywhere. You manage all the company’s finances in the cloud.

Cloud computing image 494994994994QuickBooks says the following about cloud computing:

“With your accounting data organized in the cloud, you can track sales, create and send invoices, and know how your business is doing at any time.”

“Cloud-based software allows your bookkeeper, accountant, or colleagues, to log in simultaneously and work directly with your data online.”

With cloud computing, we do not store our files and other data in our hard drive. We store them in remote computers. We refer to these remote computers as ‘the cloud’, which really means ‘the Internet.’