In an era defined by velocity, volatility, and abundance of data, financial management has gone from a painful business necessity to a road map for future performance. From running a business, budgeting personally, or pursuing a career in the finance management space — financial management principles and practices provide an important foundation.

This exhaustive guide will answer some important questions that people are asking like:

1. What is financial management?
2. What does a financial manager do?
3. What is the salary of financial manager?
4. How can I become a financial manager?
5. What is the starting point of personal financial management?

Let’s cut to the chase when it comes to financial management, and explain all you need to know.

What is Financial Management?

Financial management refers to the planning, organizing, directing, and controlling of financial activities — including procurement and utilization of funds. Financial management is the foundation of any organization, guiding a company’s financing functions to best leverage available funds to accomplish business objectives.

The list of financial management responsibilities:

• Investment decisions (capital budgeting)
• Financing decisions (raising capital)
• Dividends decisions (how to distribute profits)
• Working capital management (day-to-day financing management)

What is the Primary Goal of Financial Management?

The primary objective of financial management is to provide the most benefit to shareholders. This goal is typically met by increasing an organization’s value in line with respective investments and financing decisions.

Historically, profit maximization was the main objective of financial management, but today, sustainability, ethical decision-making and risk management are more prevalent issues.

What does a Financial Manager do?

Financial managers play an important role in defining the financial stability of an organization. A financial manager must accomplish this by both understanding a company’s previous financial position, and considering management’s actions to improve that position.

Some typical duties of a financial manager include:

• Preparing financial reports (statements and forecasts)
• Managing budgets and cash flow for an organization
• Advising top management when planning investments
• Ensuring compliance with any regulations and laws
• Evaluating the risks associated with investment decisions and recommending ways to avoid or mitigate those risks

Managing or securing funding for an organization or investment portfolio

Where do Financial Managers work?

Financial managers are in demand in a variety of industries, including:

• Banking and insurance
• Corporate finance departments
• Health care
• Government
• Nonprofit organizations
• Manufacturing
• Investing

Financial Managers also work on an independent basis, or as consultants or analysts.

What is the Starting Point of Personal Financial Management?

Managing personal finances starts with understanding income. Be it a paycheck from your employer, the revenue from your business, or income earned from freelance work, you must fully understand what it is before creating a budget, savings plan or investment plan.

Things to Do First:

1. Develop a personal budget
2. Track your expenses
3. Establish short- and long-term financial goals
4. Develop an emergency fund
5. Pay off high-interest debt

Without employing good personal finance strategies, you can quickly become overwhelmed by financial stress. This is also one of the reasons it is essential to understand how to manage financial stress moving towards financial wellness.

How to Become a Financial Manager?

If you are looking for a highly responsible, career with many avenues for growth, consider becoming a Financial Manager.

Step-by-Step Guide:

1. Earn a Bachelor’s Degree

Most Financial Managers have degrees in finance, accounting, business, or economics.

2. Learn through experience

Entry-level positions, such as Financial Analyst, Accountant, or Auditor, can help you acquire valuable experience in the finance industry.

3. Pursue Advanced Education or Certifications

An MBA or one of the following certifications could enhance your degree:
Certified Financial Manager (CFM)
Chartered Financial Analyst (CFA)
Certified Public Accountant (CPA)

4. Develop both technical and interpersonal skills

You will need to develop capabilities in analysis, leadership, and decision-making. Learning how to use programs such as Excel, SAP, and Hyperion Financial Management systems can help.

5. Network and Apply for Managerial Roles

After 5-10 years working as a financial analyst, one can pursue opportunities as a Finance Manager, Controller or Chief Financial Officer (CFO) role.

How Long Does It Take to Become a Financial Manager?

On average, it’s approximately 7-10 years (including education, certifications, and experience) for finance manager positions. Some individuals can speed up this timeline through internships, fast-track programs or advanced degrees.

How Much Do Financial Managers Make?

Financial management is one of the highest paying career pathways in business and finance.

Average Salary (India and US comparison):

USA:

• Average-$139,790/year
• Top- $200,000+ annually

India:

• Average- ₹12-25 LPA (Lakhs per annum)
• MNC Top- ₹40 + LPA

Salaries vary on industry, region, company size, and your level of experience.

What Are The Opportunities For Financial Managers?

The role of a financial manager has many opportunities as the responsibilities are evolving. In fact, the opportunities are endless now that AI is more prevalent, big data is more accessible, and the markets are global.

Areas of opportunites include:

• Risk management
• Financial planning and analysis (FP&A)
• Mergers and acquisitions
• Wealth management
• Corporate treasury
• Investment banking
• Sustainable finance (ESG reporting)

What is Financial Risk Management?

Financial risk management is when the financial manager identifies, analyzes, and mitigates the uncertainty of financial events of his/her organization that might negatively affect its performance. This might include assessing risks in currency exchange rates, interest rates, credit defaults, and operational inefficiencies.

Risk managers use financial instruments such as derivatives, insurance, and diversification strategies to minimize exposure.

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What is the Difference Between Financial Management and Accounting?

While these two fields often overlap, they serve different purposes:

Aspect	Financial Management	Accounting
Focus	Decision-making, planning, and resource allocation	Recording, classifying, and reporting financial data
Goal	Maximizing shareholder wealth	Accurate financial reporting
Users	Internal managers, investors, board members	Internal and external users (auditors, tax agencies)
Time Frame	Future-focused	Past-focused

What is the Difference Between Financial Accounting and Management Accounting?

Financial Accounting	Management Accounting
Focuses on external reporting	Focuses on internal decision-making
Governed by accounting standards	No formal standards
Looks at historical data	Uses estimates and projections

It’s important for financial managers to recognize both types of information as they will need to interpret reports and make strategic decisions.

What Skills Do You Need to Be a Financial Manager?

To succeed as a financial manager, you should possess:

• Analytical thinking: Recognize trends and make decisions based on data.
• Communication skills: Simplify complex data to share with others.
• Leadership skills: Supervise teams and departments.
• Ability to use technology: You should be comfortable with Excel, ERP systems, data visualization tools, etc.
• Ethical decision-making: Handling sensitive information ethically.
• Problem-solving: Remain flexible to deal with the financial situation at hand.

What are the Four Types of Financial Management?

1. Capital Budgeting – Choosing which capital investment opportunities to pursue over the course of a long-term project.
2. Capital Structure – Choosing a debt/equity mix of financing.
3. Working Capital Management – Choosing how different short-term assets and liabilities will be managed in the normal course of business.
4. Dividend Decisions – Determining the profit that should be retained and potentially reinvested back into the business versus distributing some or all the shareholder dividend.

How do You Manage Financial Risk in Business?

Owners and managers of businesses can manage financial risks by:

• Using multiple sources of revenue.
• Purchasing insurance.
• Hedging exchange rates and interest rates.
• Keeping good credit practices.
• Doing a regular financial analysis.

How to Financial Manage a Small Business?

Financial management for small businesses involves cash flow and sustainability.

Financial managers of small businesses will do the following:

• Complete bookkeeping effectively.
• Track margins and profitability.
• Minimize wasteful spending.
• Identify income and unexpected taxation or expenses.
• Identify any potential sources of financing.
• Use accounting software like QuickBooks or Zoho

What is the Role of Financial Asset Management?

Asset management is involved with investments and portfolios for either individuals or institutions. Asset management encompasses:

• Assessing financial goals
• Creation of investment strategies
• Managing risk and diversification
• Markets performance monitoring

Typically, those who manage assets for someone else are known as wealth managers, mutual fund managers or institutional investors.

Why Financial Management Matters?

For many financial management is the difference between extinction or succeeding, whether it is a Fortune 500 or just avoiding being broke as a freelancer managing personal finances.

Financial management means organizations can:

• Become more efficient
• Make informed decisions
• Attract investors
• Take advantage of down turns
• Achieve long-term profitability

For individuals, financial management means staying out of debt, accumulating wealth, and planning for the independent future.

Conclusion

Financial management is more than just crunching numbers, but about being strategic, smart decision making, and planning for the future. If becoming a financial manager interests you, or you want to learn to manage your own money better, the underlying principles of financial management is an important first step.

Making financial health and independence a reality starts by knowing what financial managers do, how to manage personal finance, or even how to manage risk in your business, every step, no matter how small, counts.

If becoming a financial manager is something you are considering, there is no shortage of high-impact opportunities on the path to being a financial manager… First, you need to get a firm mix of skills.

Read about: How to Become an Accountant: Skills, Salary, ACCA, CIMA & CPA Explained