To successfully run a business, expertise in multiple domains is required, financial management being among the vital ones. Fred Glynn mentions that no matter whether a person has an established business or desires to form a start-up, they shall require proper financial management to ensure the success and longevity of their operations. In his business career, Fred has built two companies from scratch that went on to become growing and profitable ventures. He additionally has more 15 years of success in selling and managing businesses involved in banking, insurance, and mortgage. His extensive experience in the business landscape has made Fred a perfect candidate to provide valuable insights on the sphere of finance management.
Financial management majorly refers to the process of planning, organizing, directing and controlling the financial undertakings of an organization or institution. It also includes the application of management principles to the financial assets of a firm, while playing a crucial role in fiscal management.
Fred Glynn mentions that majority of organizations end up experiencing loss and negative cash flows during their initial start-up period, and financial management is especially vital during these situations. The managers of such fledging firms must see to it that they have adequate cash on hand to pay the suppliers and employees, even though they have more funds going out than coming in during the initial months of the business. This basically implies to the fact that the entrepreneur must make financial projections of the expected negative cash flow, in order to have a rough estimate of the capital to be needed to keep the business running till it becomes profitable.
As a business organization starts to grow and mature, it additionally would need more funds to finance its development. Fred Glynn stresses upon the importance of planning and budgeting for these financial requirements. Determining whether to borrow money from outside or fund the expansion internally is a crucial decision made by financial managers. The practice of financial management largely involves finding the proper source of funds at the lowest cost possible, controlling the capital expenses of the company, as well as ensuring that its balance sheet does not become highly leveraged with debt and causes an adverse effect on its credit rating.
Financial management includes moving cash efficiently throughout the business cycle. This refers to the management of the turnover ratios of raw materials and finished goods inventories, the same made to the customers and collection of the receivables in a timely manner. This process keeps repeating all over again. In the meantime, the business also has to pay its bills, employees and suppliers. Astute financial management is needed to make sure that all these expenses are properly cleared. The prime objectives of financial management include maintaining enough supply of funds for the organization, ensuring all its shareholders get good returns on their investment, as well as creating valuable investment opportunities.