What is finance management?
Finance management is linked to the annual account (LINK). Through the annual accounts one can look back at the past year and its various key figures. With finance management it is possible for companies to look forward, anticipate the state of the economy and move it in the desired direction.
Finance management is about pushing the economy in a certain direction with the help of knowledge extracted from key figures and the like. Finance management is an outline of how a company can optimize their processes in order to e.g. earn more money, streamline costs, ensure better liquidity, sell goods faster etc.
As companies plan ahead, finance management is based on forecasts, budgets, and calculations. These are some of the cornerstones and prerequisites for finance management. There are also four key areas within finance management: activity management, liquidity management, capacity management and financial management.
The four key concepts of finance management
Activity management is about matching markets and products. You need to try to exploit the opportunities in a given market by choosing and developing products, solutions, and services which provide the biggest earnings.
Liquidity management is about having an overview of how many funds are available to the company now and in the future. You also need to know about the possible usage of the funds in order to create financial benefits and optimize your business.
Capacity management is about effectively managing resources. How good are you at managing your resources and where can you cut costs and thereby increase profits?
Financial management is about utilizing the company’s capital. It is about predicting how much capital will be available and planning how to use it optimally. Do you need to invest in new assembly lines, machines, buildings, acquisitions, or something else?
All in all, finance management involves planning the company’s financial action plan. Good and efficient finance management also leads to a better financial starting point.