Financial Management Definition

Running and growing a successful business requires a great deal of hard work and dedication. However, something that can make the process feel easier for you is financial management.  

But exactly what is financial management? And why is it so important for your small business? Use our guide below to learn more and see how we can help.

Financial Management Definition: An Overview

While the definition of financial management may seem intuitive, there’s more to it than you might initially expect. If you’re a new business owner of a limited liability company, corporation, or any other legal entity type, here are a few important things you should know about financial management and its meaning. 

Definition of Financial Management 

In short, financial management is the term used to describe how a business tracks, manages, and assesses its overall financial situation. 

According to the U.S. Small Business Administration (SBA), there are three important concepts involved in financial management for small businesses:

1. Budgeting
2. Cash flow projections
3. Profit and loss statement

Effective and efficient financial management is an essential part of owning and operating a successful company.

Financial Management Advantages

There are a number of financial management benefits that you may enjoy in the course of running your small business. For example, financial management can help you: 

• Assess the profitability of your business’s products and services 
• Estimate the amount of money you may qualify for in business loans
• Determine what kind and amount of expenses you may be able to afford
• Manage cash flow for your company
• Maximize profits and minimize potential losses
• Better plan for your business’s future and growth

The key to most successful businesses is often detailed financial management. So always strive to be as accurate as possible in managing your company’s finances.  

Financial Management Examples 

Financial management can take many forms. Below are some great examples of ways in which you can manage your business’s finances: 

• Create a budget and stick to it
• Put systems in place to keep accurate bookkeeping records
• Consistently track your business assets, debts, and expenses
• Obtain business credit cards and keep good credit
• Don’t be afraid to use financial management software when you need to

Things won’t always go according to plan when it comes to running a business. Nevertheless, accurate financial management can help you assess your business’s financial position, navigate difficult situations when they arise, and plan for the future. 

Financial Management Definition Summary

No matter what type of business you operate, financial management is crucial to your business’s growth and future success. Even if your business’s finances aren’t ideal 100% of the time, a comprehensive and objective financial management strategy can help you assess your financial situation and better prepare for the future. 

We Can Help

When it comes to running your business, we want to help. Whether you need assistance with managing your finances, forming your company, staying organized and compliant, or getting your business off the ground, we have the tools and resources you need to help your business succeed. 

Take a look at our many products and services, and see how we can help you start, manage, and grow your small business today.