Financial Administration (definition and objectives)

The concepts of financial administration have grown in such a way that they are applicable in the professional and labor field to any type of organization. Given that the importance of money in the development of daily life has motivated a special attention to the way in which it is spend or administers it, originating certain disciplines that support the study of generation and expenditure of resources obtained from daily work and investments.

It is considered a science of the most important, in that it disturbs individuals and companies alike, in order that they learn to manage money, as the main source of participation and exchange in the market, investments and the acquisition or sale of products and / or services.

It is often thought that the main objective of this branch of the administration is to maximize profits, however, Factors such as growth and sustainability detract from profit, allowing a financial objective to transcend to a plane of short term.

What is financial management?

It is in charge of ensuring the financial resources of a company, focusing on the liquidity and the cost effectiveness of them, making them elements lucrative in favor of the growth of said company.

In an organization, he is responsible for aspects such as: the decision-making of dividends, financing, and the investment of the company, this as a general example.

In other words, it consists of the planning and projection of the economic resources of the company in order to determine and define the sources of money. convenient so that these resources are applied in an optimal way and in this way to be able to assume the economic commitments in the short, medium and long term that are present.

While reducing risks and increasing company value based on time to market, growth achieved, usage efficient of resources and the degree of staff satisfaction.

It is a technique that relies on historical accounting facts and later uses them to propose various projections or simulation scenarios taking into account common sense and statistics.

Functions and objectives of financial management

Financial administration within an organization must fulfill different functions, which will mainly be related to the size of the organization, among these are the following:

• You must anticipate all those events that could affect the economic stability of the company, calculating the cost that would lead to an erroneous projection of costs, sales or lack of liquidity.
• Make decisions regarding the investments that the company should make.
• Evaluate, decide and comply with the financing that the company needs to make to maintain its operability.
• Find, locate and manage the economic resources that the company needs.
• Analyze and select the best investment opportunities in order to guarantee the optimization of the use of the resources obtained.
• Manage risks in order to anticipate economic disasters such as bankruptcy or bankruptcy.
• Plan for growth tactical and strategic of the company.

Based on these functions, the objectives of financial management can be:

• Achieve the necessary resources to achieve the efficient operation of the company, allocating resources according to the needs and plans of the company.
• Achieve efficient use of resources, achieving maximum optimization of them.
• Minimize the risks and uncertainty in the investment.
• Maximization of the utility, equity and net present value of the Company.

Importance of financial management

Seeing from the point of view that financial administration is responsible for planning, organizing, directing and control the economic resources of a company, it is easy to appreciate the importance of their work on the operations of the business.

• Provides support to accounting, provides important, useful and necessary information for the accounting of the company. The financial administration reviews, verifies and validates the accounting information, being able to undertake corrective measures or make suggestions to improve said information for accounting, legal or financial purposes when any external financing is sought from a bank, lender or investor.
• It supports decision-making, accounting and financial information is important and necessary for the owner or senior managers can make wise decisions, such information must be useful, accurate and relevant.
• Manage and minimize risks, it is often a primary task of financial management especially in large companies, with this it is they reduce the pressures faced by entrepreneurs and reduce undue risks in various financial situations as much as possible.
• Improves operational controls, this branch of administration is committed to improving work flow and financial controls. This review approach ensures that work is performed within the regulations and guidelines of the company, being able to make suggestions to improve the operations and business controls of the company. Such suggestions can set specific goals that reduce waste, limit expenses, and improve productivity.

To conclude, it can be said that today both individuals and companies want to achieve an excellent life economic, which allows them to invest, buy and increase their financial and purchasing power, this is where the financial administration occupies an important role that will allow them to determine and measure the gains and losses obtained, in addition to the behavior achieved by sales, purchases, among other functions.

Everything is presented and analyzed by financial statements, As the balance of results that shows the result of the operation of the company, the profit, the losses, the surpluses, the balance sheet by means of which the real financial situation of a certain company is summarized and shown, the state of profit and loss, the cash flow statement, among other balances that are usually kept administratively.

The productive efficiency and the efficient management of the companies depend on the adequate management, the skills of those in charge, the administrator is the person with some knowledge who will be in charge of carrying and managing all the information administrative and financial that management and the accounting department need to achieve this correct operability.