Scope Of Financial Management

All businesses can never run without finance so it is very important to use finance properly. But do you know how you can manage your finances properly or what is financial management and what is the scope of financial management? If you want to know more about financial management and the scope of financial management then you are at the right place.

Precap: scope of financial management.

What is financial management?

Scope of financial management

Importance of financial management

What Is Financial Management?

Financial management is a process, in which planning, organizing, directing, and controlling financial activity is done in the business. It is the practice of handling an organization’s finances.

Scope Of Financial Management

Scope Of Financial Management

Planning of finance:

Planning means thinking in advance about what to do, how to do it, when to do it. A financial plan is created to help you make the best use of your finances and achieve long-term financial goals. 

If you want a roadmap for your future success then financial planning is a great strategy for you. Follow the below steps to create a good financial planning

Evaluate where you stand:

First, you need to know where you are standing financially then you can create a successful plan.

Net worth:

It is the best way to measure your financial status. If you want to know your financial status then it is a great idea.

Track your spending:

This is another way to measure your financial status by measuring cash flow and how much you spend as compared to how much you earn.

Make a budget:

Creating a budget may help you determine how to create a good financial plan and achieve long-term goals. If you create a budget then you can understand what area you might afford to spend and where you should be saving.

Save for an emergency:

It’s important to have multiple backup funds to hold you over in case of an unexpected emergency.  saving money chart helps you to save more money.

Organizing of finance:

Organizing refers to a process where a business gets money for its business activities. A business can organize finance from internal or external sources.

Internal source:

Internal source means money that comes from within a business like:

Owner’s capital:

It is money that is invested by the owner in a business. This money comes from their savings. This type of source of finance does not cost the business, as there are no interest charges applied.

Retained profit:

When a business makes a profit, it can leave some money in the business and reinvest it to expand.

Selling assets:

Selling assets means selling assets owned by the business like machinery, equipment, and excess stock.

External source:

It means money that comes from outside a business, called an external source of finance. There are many methods that a business use like

Bank loan:

A bank loan is money that is borrowed from the bank by an individual or business.


Where a person and a business use more money than they have in their bank account, called overdraft.

New partner:

When a new person comes into the business, he brings some cash with him.

Here are some other external sources of finance

  • Venture capital
  • Share issue
  • Trade credit 
  • Leasing
  • Hire purchase
  • Government grants

Directing of finance:

Monitoring finance and spending regularly can give you an accurate picture of where your finance is going. Below are some strategies to monitor your finances and spending.

Create a tracking system:

Consistency is the most important part of keeping track of your finances. Be sure to include essential details like the date, the amount spent or earned, and the expense category with each entry.

Keep a notebook that tracks your spending:

The easiest way to track your finances is to record every transaction in a notebook. Monitoring your finances and where your money goes can help you learn what expenses affect your account balance the most.

Use a computer spreadsheet:

Google Sheets and Microsoft Excel spreadsheets can help you manage your expenses more efficiently and easily.

Controlling of finance:

It means ensuring that activities in an organization are done as per the plans. It also ensures that an organization’s resources are being used efficiently and effectively for the achievement of goals. Below are some strategies to control your finances.

Take knowledge of controlling your finance:

If you want help to control your finances and you are not sure where to start then there are many books and blogs on the internet. Consider audiobooks if you don,t want to read.

Reduce monthly bills:

Reduce your monthly expenses to take control of your finances. For example, reduce electricity consumption to reduce your electricity costs.

Stop using a credit card:

If you want to take control of your finances then stop using your credit cards. For example, you can leave your credit card at home so that you are never tempted to pull it out of your pocket and swipe it.

Importance: Scope Of Financial Management

There are many benefits of financial management but here are some points showing the importance of financial management.

  • It is very important in the field of finance to increase the wealth of the investors and the business concern.
  • Financial planning is essential for day-by-day activity in organizations. Financial management helps to make a good financial plan to achieve your goals.
  • When the funds are used properly, they can reduce the cost of capital and increase the value of the organizations.
  • It helps to make a financial decision in the business concern. Financial decisions will affect all organization operations.
  • It helps to improve the profitability chance with the help of strong and effective financial management.


The main objective of financial management is to manage the finances of an organization.

It is responsible for maintaining proper financial discipline in an organization. Financial management ensures that all financial resources are efficiently and effectively utilized and there is no wastage of resources. Hope now you understand what financial management is, why it is important and the scope of financial management.

FAQs: Scope Of Financial Management

Que1. What are the 4 types of financial management?

Ans- The three types of financial management are: 1- Capital budgeting, 2- Capital structure, 3- Working capital management.

Que2. What are the 7 principles of financial management?

AnsThere are seven principles of financial management:
-Accounting Standards

Que3. What is equity capital?

Ans- It is ownership of assets that may have debts and other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from assets.

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