Looking and speculating by the current situation in the downtrend of Nigeria economy and finances, finance management is a key knowledge and information in the life of every Nigerian who understands that money needs to be properly managed and maintained for the future purpose.
This article will explain all that you need to know about how to manage money and wealth including tips generally on finance. If you’re currently facing difficulties in your finances as a business owner, then you need this article even more.
What is Finance Management?
Finance management is simply referred to as a process of carefully organizing, planning, totally controlling and directing the financial undertakings of an organization. Some of the objectives of financial management are:
● Ensuring the sufficiency of funds available
● Noting the use of the funds available
● Effectively reducing financial costs
● Documenting financial activities
These are just a few out of the primary reason for financial management. Companies and organisations that intend to last long in their fields must ensure that they have a good financial standing and financial management skills
What are the functions of financial management services?
Here are the 5 most important functions why financial management is needed as a skill personally or in a large organisation.
1. Estimating the need for funds
Funds are needed for the proper and adequate running of businesses and organisations. Adequate funds must be present to ensure the continuity of every activity in an organisation. A financial manager must ensure that demand for money is properly handled and even in the case of emergency it must be well prepared for. Care must be taken for the business not to get drained because of the shortage of money and there should be a balance between the flow of money into the business or organisation and the utilisation of such money for a different purpose to help the company from bankruptcy.
2. Identifying Capital Sources
Money must be made from a particular source and it is the sole function of the finance manager to be able to find out and identify the sources that bring money into the company and the sources that money goes out to. It is a need of great importance to ensure that the risks taken will not affect the company or business even if the returns expected are affected in any way, the manager must ensure there’s a balance between debts( sourcing from business creditors) and equity( sourcing from business owners) this way the financial sector of the business is stable.
3. Deciding Funds Sources
Funds are raised from various sources which could be from- company shareholders, public investors and private investors, financial institutions, sales and other sources. Fundraising must be balanced because if funds are raised from the business owners on every basis then the business would have a bloated equity status. For example, a company relying on the capital from a dept extensively would, in turn, make no profits subsequently. The finance manager must carefully evaluate the factors that would impact the short term and long term profitability of the company and find a way that balances the wealth of the business as well as grow it.
4. Investing Funds
This is a key factor in every business and company that desires to make a profit in their sphere. The funds that are raised must be ensured to multiply. This is something financial managers must take note of as regards determining where to invest their funds and ensuring that the investment is reliable and true. The investment proposals must cut across the benefits of the company, capital budgeting in case of emergencies, analysing of opportunity cost etc. Financial managers must not be carried away by profitability alone but must ensure the company money is safely invested and it can be recovered with little or no damage.
5. Adequate Financial Control
This could be regarded as the most important function of financial management. There should be control measures as regards every financial issue that concerning the business such as cost and profit control, budget control, funding control, profit control etc. The intent is to ensure the returns are thoroughly maximally as a great ROI. Every finance manager is to understand what it takes to effectively run the finances of the company more important the funds and profitability because they keep the company running. Safety and liquidity issues must also be looked at critically as well as risks and returns while gathering and investing funds.
About the functions highlighted above, there will be tips for personal financial management that you need as a person.
Tips for personal finance management
● Track your spending daily
A lot of people most importantly Nigerians do not take note of tracking personal finances and where they spend all their money, for a great financial life as an individual, you need to know what you spend money on. You can also use applications to track this if you’re not too opportune to sit with it. You must educate yourself and improve after you do.
● Create realistic budgets
This could range from daily, weekly and monthly budgets. You can use your income range to make this budget. It would help to curtail how much you spend and even save. Budgets will encourage better financial management habits and you need to be committed to keeping budgets. This money management method requires a lot of dedication and discipline, you need to ensure it’s a budget that you can work with.
● Build your savings
Savings is something that could take time but it should be separated from emergency funds that you can take out from when unforeseen situations happen. Your general savings could be targeted at something or a goal and both are very important in financial management. You can use applications such as Piggyvest or Cowrywise to build saving habits.
The importance of financial management can’t be overemphasized as it is meaningful both to corporate organisations and personal individuals. Every Nigerian must be thoroughly learned regarding the basic understanding of financial management and how it applies to daily living and survival.