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The Immense Importance of Financial Management: Why Does It Matter So Much?

Posted by : Premraj | Posted on : Friday, June 14, 2019


According to the latest report by U.S. News, MBA students with a specialization in Financial Services are the second highest earners with an average salary exceeding $118,500 easily, second only to consulting apparently.

In the hardcore corporate world that we all do business in today, nobody is going to pay such huge salaries on an average to their employees if they do not provide their employers with sufficient value to justify it. So, the question is not whether financial management is immensely important in modern business, but what exactly are the aspects of the job that make it so useful?

There is No Other Sector of the Business More Important than Financial Management

Business is about money management, and no other aspect of business can supersede its importance. One may argue that each part of a business model is as important as the other and, in many ways, they would be right too. Having said that, a company cannot function without its money being managed with efficiency and when that same management is done by a brilliant mind and a properly trained individual, the organization begins to see massive profits and grow bigger as a result.

If you want to see an example of how important financial management is to the success of a business, all you need to do is take a look at Chinese billionaire Jia Yueting and how he ruined his multibillion dollar company LeEco with poor financial management and overconfidence.

If the internet billionaire business tycoon who was worth $4.5 billion in 2016 had listened to his financial managers, or if he had perhaps taken a course in financial management himself, the disaster could have actually been avoided. He had every resource and the foundation he needed, and yet he failed miserably, cementing the fact that nothing is really more important than managing your money intelligently when it comes to big business. All it takes is one wrong decision and you could lose everything in the domino effect.

Financial Management is What Keeps the Lights on Even in the Worst Sales Years

If Apple can lose sales, rest assured that any business can, and there’s actually nothing wrong with it in most scenarios. Although shareholders and new entrants may panic, the veteran businesses know that loss and profit are both inevitable parts of being in business.

Admittedly, every business in existence would like to see themselves profiting by the billions every year, but that doesn’t always happen, which is why the financial management aspect is so very important.

Financial experts prepare the budget each year in such a way that there are provisions for those cold periods and bad years. Without them managing the money in the best possible way, employees would not get their salaries regularly, alongside the multiple benefits they enjoy, without realizing where the money is coming from. In fact, if the financial management is poor enough, it may literally turn off the lights and close shop after just one bad year, which has happened before, even with MNCs.

Unfortunately, it might even be necessary to close off a few offices and downsize to save the core company. Knowing when to do so and reporting it as such is also part of what the finance department is all about.

Creation of Financial Reports

The data analysts are often given the job of interpreting and determining the ROI on an organization’s multiple ventures at the end of the year, but they can, however, only do so if the financial data is presented to them by the finance department.

The same organized data is also sent in brief to shareholders every year so that they can see for themselves how their money is being managed. A poor year cannot be hidden by the finance department without resorting to forgery, but how they present the data in their report is what will often be a key determining factor in the investors’ next actions regarding the dip in performance.

The Tax Management

The accounting department deserves credit here as they keep track of the taxes that need to be paid by the company, fill out the forms and even prepare the books for the IRS.

However, the accounting department is not responsible for direct money management. What it means is that when the time to pay taxes is here, it’s up to the finance department to produce the necessary funds which the accounting department must have access to, in order to pay the taxes. Unless the financial managers are up to the task, the entire company could be facing anything from being shut down, to complete bankruptcy.

Is an MBA in Financial Management the Right Career Path?

As already mentioned, MBA graduates with a Financial Management degree earn some of the highest salaries in the country and financial experts are an inevitable part of any business, so the answer would have to be a yes.

Out of the many online MBA programs in Michigan, the one by Kettering University comes highly recommended because, in addition to making Financial Management a highlighted course of the entire curriculum, the program also concentrates on three of the other most in-demand specializations wanted in MBA graduates, which are International Business, Strategic Business Management and Leadership.

If you want to become a financial analyst and manager, or even start your own entrepreneurial venture, this is one of the better online MBA programs in Michigan to go with, but do check out the site and the full brochure first before taking any decisions.

Now that we have discussed the main details, let’s take an overview on the subject. The very concept of business is based on managing money, so isn’t it intuitive and obvious that people with intricate knowledge and experience in financial management will be in high demand within profiting corporations? That itself can be summed up as the overall reason behind why financial management remains one of the most important subjects in business school.

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