People with a non-commerce background may think that financial management must be a dull field involving endless balance sheets and relentless talking about money.
However, financial management is more than just that.
Financial management entails managerial functions and handling an organisation’s financial resources. Financial Managers are the backbone of firms, dealing with the most crucial business aspect – planning and organising funds.
This article will discuss the importance and scope of financial management in India & worldwide.
Importance of Financial Management
Financial management is vital for various reasons:
- Proper financial management ensures the economic growth and stability of an organisation.
- Financial Managers help an organisation in the procurement of funds for business operations.
- Financial Managers help organisations utilise money more efficiently.
- A fundamental responsibility of a Financial Manager is to suggest the right investment opportunities to the company. They lower the risk factor in any kind of investment.
- Financial Managers should make the right decisions to maximise their company’s profit.
- Managers help the company minimise the taxes any business has to pay.
Understanding the Scope of Financial Management
As an integral part of overall management, financial management is mainly concerned with an organisation’s acquisition and use of funds. To understand this, we must go through the crucial factors that influence the scope of financial management:
1. Profit Maximisation
Profit maximisation is one of the most crucial responsibilities of any Financial Manager. In a company, there can be short-term and long-term profits. It is the duty of Financial Managers to research opportunities for profit-making while mitigating risks.
2. Wealth Maximisation
A company’s wealth is defined as the difference between benefits and costs. So, a Financial Manager should emphasise increasing the benefits in terms of cash flow. It can boost profit for the shareholders and make the company wealthier in books.
3. Financial Analysis & Planning
Financial Managers must determine the amount the funds a company holds and spend on the key managerial expenses accordingly. It is the responsibility of the finance executives to estimate the right amount of fixed and working capital required.
4. Cash Flow Management
Cash is indispensable to meet daily expenses, pay off creditors, pay salaries and fulfil various other business commitments. Thus, it is necessary that companies have substantial cash reserves. Financial Managers ensure that the company’s assets and securities remain mostly liquid so that the money is easily accessible in times of need.
5. Investment Decisions
Financial managers are responsible for choosing the right kind of investment decisions. Short-term investments are funds allocation in current assets in the short run. It can be used in short-term investments, bank deposits, inventories and so on. On the other hand, long-term investments are those investment tools which have the potential to bring long-term capital gain. It can be fixed deposits, investing in start-ups, purchasing equity of potential companies, real estate and more.
6. Risk Management
Risks can be of three types: financial, business and non-business risks. Financial Managers should be careful about protecting assets (financial risk) and be aware of the company’s future possibilities of other risks.
7. Dividend Decisions
Public companies listed on the stock market indexes like Sensex and NASDAQ must make crucial decisions regarding share price control and dividends. Here again, Financial Managers play a vital role in shaping these financial decisions by developing a dividend policy according to the market.
A Career in Financial Management
Financial management has a broad scope for those looking to make a career in this field. These career opportunities are not just lucrative but come with exciting challenges. Various companies, governments, and PSUs hire corporate finance professionals across departments. Finance Managers can also join banks, asset management companies, investment companies, brokerage firms and insurance companies.
Even sectors like technology, retail, real estate, and other non-financial industries hire executives with sound financial management skills.
Demand for skilled Financial Managers specialising in fund management and risk management is high in the job market.
The salary of Financial Managers varies based on different parameters such as experience and skillset. On average, the median salary of a finance executive in India is INR 10,11,274 per year. Professionals with advanced degrees like Chartered Financial Analyst (CFA) Course & US CMA Course (Certified Management Accountant) have a better scope of getting high-paying jobs.
Since finances are an integral part of any organisation, financial management also becomes important. So, if you are a serious and aspiring financial professional, you can level up your game by enrolling in certification courses like CFA (Chartered Financial Analyst) and CMA (Certified Management Accountant). These certifications are globally-recognised and broaden your career options. C These courses add value to your resume as well. We at Zell Education are here to guide you through the admission procedure. Contact us to learn more.
What is the scope of financial management?
The scope of financial management is wide, diverse and extensive. Financial Managers are involved in making various financial decisions, ensuring proper cash flow management, supervising earnings management, estimating financial requirements, and so on.
What is the scope of finance in future?
The field of finance has a huge scope in future. As finance is an integral part of our economy, Financial Managers will always be in high demand. If you want to build a career in finance, the most popular sectors include corporate finance and public banking, credit and financial planning, and asset management.
What are the most important tasks handled by Financial Managers?
Scopes of financial management includes investment decisions, financial decisions, liquidity decisions, dividend decisions, management of earnings and management of cash flow, among many more.
Why is financial management important for the future?
The scope of financial management looks bright in the coming decade. Established firms are thriving, startups are emerging, and all of them must hire professionals for financial management. Hence, Financial Managers will always be in need. According to the U.S. Bureau of Labor Statistics, the employment of Financial Managers is projected to grow 17% from 2021-2031.