Definitions, Benefits and Principles in Financial Management

Posted by Imam Larh on Friday, 16 March 2018

Financial management - defined as the overall activities of the company related to the business of obtaining funds with a sacrifice that Basic Concepts, minimum and most profitable conditions as well as efforts to use the funds as efficiently as possible.

Understanding Financial Management According to Experts Consider the understanding of financial management according to the following experts:

Financial management by Liefman is an effort to provide and use money to acquire assets.

Financial management according to Erlina, SE., Is the management of the financial functions include how to get the funds (rising of funds) and use the fund (allocation of funds).

Financial management according to Prawironegoro is the entire activity of the owner and management of the company to obtain capital as cheap as possible and use the capital effectively, efficiently and as productively as possible to generate profit.

Principles of Financial Management

Financial management in practice is an action taken in order to maintain the financial health of companies / organizations. It is necessary also a good way of financial management that can be realized by running the principles of financial management that must be considered include:

1. Consistency
The company's financial system must be consistent over time, meaning that the financial system should not change when an organization changes. Inconsistent treatment may indicate a misuse of financial management.

2. Accountability
Accountability can be regarded as a form of moral or legal liability or obligation attached to individuals, groups or organizations to explain how to manage the resources they possess such as funds, equipment or powers acquired from third parties have been used.

3. Transparency (Transparency)
Each organization must be open to its work by providing information related to its activities to stakeholders. As in such an accurate, complete and timely presentation of financial statements and easily accessible to the owners of interests and beneficiaries. Organizations that are not transparent can be suspected that there are things that are hidden.

4. Survival (Viability)
Survival is a measure of the level of security and financial sustainability of an organization. The manager's job is to prepare a financial plan that shows an organization implementing an activity plan and meeting its financial needs.

5. Integrity (Integrity)

Every company / organization must be able to guarantee its members have the integrity of the breed. In addition, financial reports and records should be monitored for integrity through the completeness and accuracy of records.

6. Management (Stewardship)
The organization fund that has been acquired must be well managed by taking into account the financial risks, establishing a control system and financial system that is appropriate to the organization. That is a step to achieve the goals that have been planned.

7. Accounting Standards
The accounting system used by the organization shall be in accordance with generally accepted accounting principles and standards.

Benefits of Financial Management
Looking at the above principles of financial management is useful for ease in the management of corporate finances in order to maintain financial health to be consistent with the goals and ideals of the company.

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