Reviewed by: Jayprakash Prajapati | Last updated on September, 24, 2023
Financial management is one of the important parts of overall management, which is directly related to various functional departments like personnel, marketing, and production. Financial management covers a wide area with multidimensional approaches. The following are the important scope of financial management.
What is the scope of Financial Management?
1. Financial Management and Human Resource
2. Financial Management and Marketing
3. Financial Management and Production Management
4. Financial Management or Mathematics
5. Financial Management and Accounting
6. Financial Management and Economics
1. Financial Management and Human Resources.
Financial management is also related to the human resource department, which provides power to all the functional areas of the management.
The financial managers should carefully evaluate the requirement of manpower for each department and allocate the finance to the human resource department as wages, salary, remuneration, commission, bonus, pension, and other monetary benefits to the human resource department. Hence, financial management is directly related to human resource management.
2. Financial Management and Marketing.
Produced goods are sold in the market with innovative and modern approaches. For this, the marketing department needs finance to meet its requirements.
Introduction to Financial Management 5 The financial manager or finance department is responsible for allocating adequate finance to the marketing department. Therefore, marketing and financial management are interrelated and interdependent.
3. Financial Management and Production Management.
Production management is the operational part of the business’s concern, helping much of the money to profit. The benefit of concern depends on production performance. Production performance requires finance. Because the production department needs raw materials, machinery, wages, operating expenses, etc.
These expenditures are decided by the financial department, and estimates are made. And finance managers allocate appropriate finance to the production department. The financial manager must be aware of the operational process and finances required for each process of production activities.
4. Financial Management or Mathematics.
Modern approaches to financial management applied a large number of mathematical and statistical tools and techniques.
They are also called econometrics. Economic order quantity, discount factor, time value of money, the present value of money, cost of capital, capital structure theories, dividend theories, ratio analysis, and working capital analysis are used as mathematical and statistical tools and techniques in the field of financial management.
5. Financial Management and Accounting.
Accounting records include the financial information of the business concern. Hence, we can easily understand the relationship between financial management and accounting. In the olden periods, both financial management and accounting are treated as the same discipline.
Then it has been merged as Management Accounting because this part is very much helpful to finance managers in taking decisions. But nowadays financial management and accounting disciplines are separate and interrelated.
6. Financial Management and Economics.
Economic concepts like micro and macroeconomics are directly applied to financial management approaches. Investment decisions, micro, and macro-environmental factors are closely associated with the functions of a financial manager.
What is Future Scope of Financial Management Nature.
The field of financial management is constantly evolving in response to changes in the global economy, technology, and regulations. Understanding the future scope of financial management requires considering various factors that are likely to shape its nature and direction. Here’s a guide to the future scope of financial management:
1. Technological Advancements:
- Digital Transformation: The adoption of advanced technologies such as artificial intelligence (AI), blockchain, and data analytics will continue to reshape financial management practices. These technologies will automate routine tasks, enhance data analysis, and improve decision-making.
- Fintech Integration: Financial technology (fintech) companies are disrupting traditional financial services. The integration of fintech solutions into financial management will become more prominent, offering innovative tools for budgeting, investing, and financial planning.
2. Data-Driven Decision-Making:
- Big Data and Analytics: Financial managers will increasingly rely on big data analytics to gain insights into market trends, customer behavior, and risk assessment. Data-driven decision-making will be a core competency in financial management.
3. Risk Management and Compliance:
- Cybersecurity: With the growing importance of digital data, cybersecurity will become a critical aspect of financial management. Protecting financial information and ensuring compliance with data protection regulations will be paramount.
- Regulatory Changes: Financial regulations are likely to continue evolving in response to emerging risks and challenges. Financial managers will need to stay updated on regulatory changes and ensure their organizations comply with new requirements.
4. Sustainability and ESG:
- Environmental, Social, and Governance (ESG) Factors: Integrating ESG considerations into financial management practices will become increasingly important. Investors and stakeholders are demanding transparency and responsible business practices.
5. Globalization and International Finance:
- Global Expansion: As businesses expand globally, financial managers will need to navigate international markets, currencies, and regulatory environments. Understanding exchange rate risks and cross-border investment strategies will be crucial.
6. Financial Planning and Wealth Management:
- Personal Finance Technology: The future of financial management will involve personalized financial planning tools and wealth management platforms that cater to individual needs and goals.
7. Sustainable Finance:
- Green Finance: Sustainable finance initiatives will continue to grow, offering opportunities for financial managers to allocate capital to environmentally friendly projects and businesses.
8. Ethical and Social Responsibility:
- Ethical Investing: Ethical and socially responsible investing will gain momentum, requiring financial managers to consider the ethical implications of their investment decisions.
9. Education and Certification:
- Continuous Learning: Given the dynamic nature of finance, financial managers will need to engage in lifelong learning to stay updated with industry trends, best practices, and emerging technologies. Pursuing professional certifications and qualifications will remain essential.
10. Entrepreneurial Finance:
- Supporting Startups: Financial managers will play a critical role in supporting startups and small businesses by providing financial advice, helping secure funding, and managing early-stage finances.
11. Behavioral Finance:
- Understanding Human Behavior: Behavioral finance, which explores how psychological factors influence financial decisions, will continue to be a significant area of study. Financial managers can apply insights from behavioral finance to better understand investor behavior.
In conclusion, the future scope of financial management is multifaceted and dynamic, driven by technological advancements, regulatory changes, ethical considerations, and global economic trends. Professionals in this field must embrace continuous learning and adapt to these evolving dynamics to thrive and contribute effectively to their organizations’ financial well-being and sustainability.