Nature of Financial Management
Nature of Financial Management:
Nature of financial management could be spotlighted with reference to the following aspects of this discipline:
- Financial management is a specialized branch of general management, in the present-day-times. Long back, in traditional times, the finance function was coupled, either with production or with marketing; without being assigned a separate status.
- Financial management is growing as a profession. Young educated persons, aspiring for a career in management, undergo specialized courses in Financial Management, offered by universities, management institutes etc.; and take up the profession of financial management.
- Despite a separate status financial management, is intermingled with other aspects of management. To some extent, financial management is the responsibility of every functional manager. For example, the production manager proposing the installation of a new plant to be operated with modern technology; is also involved in a financial decision.Likewise, the Advertising Manager thinking, in terms of launching an aggressive advertising programme, is too, considering a financial decision; and so on for other functional managers. This intermingling nature of financial management calls for efforts in producing a co¬ordinated financial system for the whole enterprise.
- Financial management is multi-disciplinary in approach. It depends on other disciplines, like Economics, Accounting etc., for a better procurement and utilisation of finances.For example, macro-economic guides financial management as to banking and financial institutions, capital market, monetary and fiscal policies to enable the finance manager decide about the best sources of finances, under the economic conditions, the economy is passing through. Micro-economics points out to the finance manager techniques for profit maximisation, with the limited finances at the disposal of the enterprise. Accounting, again, provides data to the finance manager for better and improved financial decision making in future.
- The finance manager is often called the Controller; and the financial management function is given name of controllership function; in as much as the basic guideline for the formulation and implementation of plans-throughout the enterprise-come from this quarter. The finance manager, very often, is a highly responsible member of the Top Management Team. He performs a trinity of roles-that of a line officer over the Finance Department; a functional expert commanding subordinates throughout the enterprise in matters requiring financial discipline and a staff adviser, suggesting the best financial plans, policies and procedures to the Top Management. In any case, however, the scope of authority of the finance manager is defined by the Top Management; in view of the role desired of him- depending on his financial expertise and the system of organizational functioning.
- Despite a hue and cry about decentralisation of authority; finance is a matter to be found still centralised, even in enterprises which are so called highly decentralised. The reason for authority being centralised, in financial matters is simple; as every Tom, Dick and Harry manager cannot be allowed to play with finances, the way he/she likes. Finance is both-a crucial and limited asset-of any enterprise.
- Financial management is not simply a basic business function along with production and marketing; it is more significantly, the backbone of commerce and industry. It turns the sand of dreams into the gold of reality.
No production, purchases or marketing are possible without being duly supported by requisite finances. Hence, Financial Management commands a higher status vis-a-vis all other functional areas of general management.