What Is The Importance Of Financial Management Shop?
Financial management is essentially the management of the finances of a business or an organization so as to achieve its financial objectives. In case we consider a for- profit business, the key objectives of financial management would be to create wealth for the business and provide an adequate return on investment in keeping with the business risks and resources invested. There are some highly reputed organizations which have developed into a one-stop place as financial management shop for customers and provide superior financial services. They have built trust and reliability as their USP.
These shops are boutique services for all forms of financial products and benefits the client as also the company, since the client gets all financial services under one roof, saving time and costs. For the company, it helps them understand the unique needs of each customer and cross-sell products, maximizing revenue.
Objectives
There are two major functional objectives of financial management.
• Performing regular finance functions including assessing funds source, allocation and controlling making use of funds in the direction to achieve the primary goal of profit and wealth maximization.
• Non-recurring functions such as preparation of financial plans, managing cash flows during liquidity crisis, enterprise valuation during mergers or Financial Analysis
Functions
Any financial management shop would cater to a variety of financial needs. Some of these functional services include;
• Financial Analysis: All companies and businesses have needs which require some level of financial analysis. This could be for product pricing, cost segregation, transfer pricing, working on ratios for business performance metrics or analyzing ways to reduce costs and identify productivity enhancing paths. In such cases, CFAs and other subject- matter experts involve in reading various reports and financial documents to suggest suitable recommendations to create growth.
• Financial Modelling: Unlike plain vanilla what-if analysis, complex financial models are necessary to incorporate intangibles and situational metrics. These models could be static or dynamic. Normally dynamic models are custom-designed for a specific client and is developed or tailored to obtain multiple situational outcomes. Variables, such as legislation changes and its impact, risks, cost surges or spikes and monetary turbulence hugely impact business outcomes. Models help in identifying soft areas and take pro-active steps to counter them. Industry-experienced professionals in such financial management shops are ideally placed to leverage their domain expertise and add value to business, industry and even the government.
• Risk Management: Risk management has assumed great importance in business concerns, particularly financial risks, since markets have become globalised and managing risks is critical to survival. Financial advisory teams in financial management shops integrate company’s strategic planning with risk mitigation methods for their clients. Large conglomerates, which operate in multiple geographic regions, need to identify all risks at a granular level and study its impact on the enterprise. These are then developed into standard processes to ensure failures are negated.
• Currency, Commodities and Stock Reports: Most of these boutique financial firms have in-house analysts and economists who regularly analyse trends in world markets in currencies, oil, commodities and stocks. These are mapped to the regional political environment to identify and advise clients on the emerging investment option.
Financial management is a key element of any company’s overall business strategy. All important parameters, such as profitability, employee satisfaction, compliance, planning and performance depend on it. Many firms initiate the entire engagement with a detailed financial SWOT Analysis