What Is Finance Management?

Finance management is the strategic planning and management of an individual or organisation’s finances to better align their financial status with their goals and objectives. Depending on a company's size, finance management seeks to optimise shareholder value, generate profit, mitigate risk, and safeguard the company's financial health in the short and long term. When working with individuals, finance management may entail planning for retirement, saving for university fees, and advising on other personal investments. 

Purpose of financial management 

The purpose of financial management is to guide businesses or individuals on financial decisions that affect financial stability both now and in the future. To provide good guidance, financial management professionals will analyse finances, investments, and many other forms of financial data to help clients make decisions that align with goals. 

Financial management can also offer clients increased financial stability and profitability when there’s a strategic plan for where, why, and how to allocate and use finances. How financial management professionals help clients reach goals will depend on whether the client is a company or an individual.

Types of financial management

Finance management professionals handle three main types of financial management for companies. These types involve various aspects of the internal decisions a company will likely need to make about cash flow, profits, investments, and debt holding. Many of these decisions will depend significantly on factors like company size, industry, and financial goals. Financial management professionals help companies reach financial goals by guiding them in the areas of financing, investments, and dividends. 

Financing

Financial management professionals assist companies in major decisions that involve acquiring funds, managing debt, and assessing risk when borrowing money for purchases or building the company. Financing is also required when raising capital. Companies can make better, more strategic financing decisions to raise capital or obtain funds when they have information on cash flow, market trends, and other financial stats on the health of a company. 

Investment 

Financial management professionals can help companies choose where, what, and how to invest. The financial professional’s job is to determine the number of assets (both fixed and long-term) a company will need to hold and where cash flow goes based on current working capital. This type of financial management is about assessing assets for risk and return ratios. Financial managers will consider a company’s profits, rate of return, cash flow, and other criteria to assist companies in making investment decisions. 

Dividend

Companies should have a dividend disbursement plan and policy in place, with guidance from a financial management professional who can create and implement that plan, suggest modifications when needed, and monitor payouts if and when they occur. Any time a financial decision is made, it’s essential to consider dividend payments since you may hold dividends to fund certain financial decisions within the company. 

It’s also important to have a flexible long-term plan that can grow with the company. Some more mature companies may pay dividends at certain times or once a year; the payout schedule depends on many factors. Other companies may retain or reinvest dividend payments back into the company if the company is in a growth phase.

What is the financial management cycle? 

The financial management cycle is a financial planning process critical to a company's growth and development. It includes: 

• Planning and budgeting 

• Resource allocation

• Operations and monitoring 

• Evaluation and reporting 

Effective financial management aligned with an organisation’s goals and objectives can increase efficiency and stability. These parts of the financial management cycle must work together to be the most effective. 

1. Planning and budgeting 

During this analytical phase in the financial management cycle, a company uses past and current financial data to set financial targets, modify objectives, and change the current budget. This phase will typically involve detailed planning as well as a big-picture one, meaning a company will look at day-to-day operations and long-term financial plans and try to link financial targets to these activities. 

The goal is to create a strategic financial plan for the company that aligns with objectives for the next three to five years. When setting specific budgets, a company may budget for one financial year at a time. A big reason for this is that a budget involves many moving parts that are subject to change due to market fluctuations.

2. Resource allocation 

Financial managers assign value to capital resources (anything a company uses to manufacture or produce goods or services) and advice allocating these resources based on criteria like projected company growth and financial goals. Resource allocation is important because it allows a company to have a long-term financial plan focused on its business objectives. Financial management professionals help companies by providing a framework for using capital resources and creating a portfolio that will generate the most revenue, given the company's financial status. 

3. Operations and monitoring 

This phase is critical to protect against fraudulent activity, errors, compliance issues, or other variances in the allocation of funds. Financial management professionals should run regular financial reviews of business operations and cash flow. These periodic reviews can help mitigate fraud and identify other issues. It is a preventative step that ensures the continuity of business operations by securing the validity and accuracy of a company's financial processes. 

4. Evaluation and reporting 

Financial management professionals should evaluate a company’s current financial management system and propose changes when necessary. Financial reports and financial data can be helpful when assessing the efficiency and success of an existing system. 

Some criteria a financial management professional may consider when evaluating a financial management system include security, compliance, company data needs, and the level of support needed. These criteria vary by the company’s size, industry, current financial situation, and long-term goals. 

Financial management professionals should be able to offer research-based suggestions that can help a company securely store and manage financial data in compliance with relevant laws and harness that data when needed. 

How to work in finance management 

To work in finance management, you’ll need a degree. Useful subjects include business, economics, finance, statistics, maths, or a related field. Employers often like to see professional experience before hiring for a financial management position.

Educational requirements 

A bachelor’s degree in finance, economics, maths, statistics, business management, or a related field is the standard requirement to work in finance management. You may enter the field by securing a traineeship, and it is possible to work in financial management without a degree if you are studying for professional qualifications, such as with the Association of Chartered Certified Accountants (ACCA) or the Institute of Financial Accountants (IFA). 

A master’s degree may be useful but not required. If you gain a place on a graduate scheme, you can expect to work towards some professional qualifications. 

Certifications

As part of your training, you’ll undertake some professional qualifications determined by the organisation you work for and qualify you to work as an accountant. Common certifications that financial management professionals hold include: 

• Association of Chartered Certified Accountants (ACCA)

• Chartered Institute of Management Accountants (CIMA)

• Chartered Institute of Public Finance and Accounting (CIPFA)

• Institute of Chartered Accountants in England and Wales (ICAEW)

• Institute of Chartered Accountants in Scotland (ICAS)

• Chartered Accountants Ireland 

Skills 

Careers in finance management require a mix of financial skills and business skills. Understanding business operations is essential, but proficiency in accounting, financial, and data analytics is equally important. Finance management merges management and finance. You may find success working in the field of finance management if you hold these skills: 

Workplace skills 

• Good communication 

• Problem-solving 

• Organisation 

• Quality leadership

• Proficiency in public speaking and presentation

• Ability to manage a group of people 

• Detail-oriented 

• Analytical thinking

• Decision-making 

• Ethical 

Technical skills 

• Basic and advanced maths (algebra, statistics, basic computing) 

• Computer 

• Proficiency in financial management systems

• Understanding of statistical modelling software and spreadsheets

• Industry-specific knowledge 

• Proficiency in accounting principles and techniques 

• Understanding investment principles 

Experience

Professional experience in finance or business management is key to advance into upper-level finance management positions. Traineeships and placements are available, offering valuable experience. You’ll find these advertised by accounting bodies. It’s not just the quantity of experience but also the quality. Try to find jobs in finance or accounting. It’s also helpful to find jobs to help you move into the specific industry you want to work in. 

Careers in finance management 

The scope of careers in the finance management field is vast. You'll have many career pathway choices, from entry-level positions in bookkeeping to management positions like a financial manager or management accountant. 

Your career will depend on education, certifications, professional experience, industry, employer, and location. Salaries among finance management jobs will also differ based on these factors. Individuals in senior-level positions like CFO and vice president of financial planning and analysis will be among the top-tier finance management earners. 

Finance manager 

Average annual UK salary (Glassdoor): £58,572 [1]

Financial managers oversee a financial department and may assist in creating strategic financial plans for an organisation. Their duties include preparing financial reports and statements, forecasting, setting budgets, analysing financial markets for trends and investment opportunities, and seeking ways to mitigate costs.

Financial advisor

Average annual UK salary (Glassdoor): £48,801 [2]

Personal financial advisors assist individuals in planning for their future by helping them manage money and seek out investments based on individual situations. A personal financial advisor meets with individuals to set financial goals with short and long-term plans to achieve those objectives. Some financial aspects an advisor may handle include taxes, retirement, college savings, insurance, estate planning, and more. Financial advisors may work for an investment firm or on their own. 

Financial analyst

Average annual UK salary (Glassdoor): £43,134 [3]

Financial analysts may work within a large corporation or with individuals. Their job is to analyse their client’s financial situation and make financial suggestions based on goals and financial status. A financial suggestion may include finding investment opportunities. The goal of an analyst is to evaluate market trends and position a client in a secure financial standing based on the analysis of trends and related data.

Management accountant 

Average annual UK salary (Glassdoor): £39,867 [4]

Management accountants work for corporations or government agencies. They aim to provide an in-depth financial analysis of an organisation’s internal financial processes for strategic financial decision-making. Key decision-makers in an organisation use the information gathered by management accountants to aid in long-term and short-term decision-making. 

Learn more with Coursera. 

Finance management is the process of planning and managing an individual or organisation's finances to achieve financial goals. It involves financial analysis, budgeting, and strategic decision-making to optimise financial health and profitability. Financial management professionals can help individuals with retirement planning and saving for college, while businesses focus on areas like investment, cash flow, and risk mitigation.

You can prepare yourself for a career in finance management today by working on key skills you’ll need in this field. One way to take the next steps towards a finance management job is to enroll in a finance management course like Investment and Portfolio Management Specialisation or Investment Management Specialisation offered on Coursera. These Specialisations are specially designed for professionals in finance management who want to build their CVs, skills, and prospects for employment.