Financial Management

Financial management covers the practical side of handling an organisation's finances. It includes budgeting, forecasting, managing cash, deciding how to fund operations and investments, controlling costs and monitoring financial performance.

In a company, the finance team, usually led by a chief financial officer, makes sure there is enough cash to pay staff and suppliers, that money is borrowed on sensible terms, that spending stays within budget and that investments are likely to pay off.

For example, financial management might involve noticing that customers are taking 60 days to pay instead of the agreed 30, chasing those payments and arranging a short-term credit line to bridge the gap.

The term overlaps with corporate finance. Corporate finance tends to focus on big strategic decisions, such as major investments and how to fund them. Financial management also includes routine control, reporting and planning. The same principles apply to households, charities and governments, which all need to plan and control their money.