5 Main Components of Financial Management

What Are The Important Elements In Financial Management?

      Many people complain about how to manage good money management. Actually, there are no standard rules in managing finances to achieve financial freedom in the future. It all depends on your habits and lifestyle. Financial management has a wide scope. Therefore, you should know in advance what components you must have to start improving your financial planning. The following are 5 main components of managing finances.

Budget Planning

For those of you who live alone, or still with parents, you may think that making a budget plan is not too important, this assumption is not right.

Making a financial plan turns out to greatly affect the way your life goes forward. Especially if you are married, and even have children. This financial plan will be needed. (hudoig.gov)

Managing a household is not easy, you have to think about the lives of two (or more) people at the same time.

Starting from cooking, cleaning the house, taking care of children, or pay for a child's education.

Therefore, it is time for you to start making short and long-term financial plans.

In making a budget, you have to do it carefully so that there is preparation for the financial planning you have done.

Many financial experts say that developing a financial plan is the most important stage in financial management.

They make a budget by allocating income into needs and wants.

In addition, financial experts recommend creating different accounts to differentiate the categories. For example, an account for shopping is different from an account for paying bills.

Expense Recording

Business people often ask all employees to record the smallest expenses for goods or services used. The goal is to find out where their money goes, whether it is in accordance with the plans that have been made or not.

Company finances will also be more organized. Even if there is an error, it will be easier to trace.

This recording is useful as a benchmark for the company and analysis of financial condition.

By recording expenses, you can find out the real financial pattern and condition of yours or company in more detail.

You can also estimate how much money you have allocated to your savings account.

Once you know the financial pattern, it will be easier for you to predict the amount of budget that will be issued in the following month. So you can make a budget now.

Internal Control

Generally, in order to achieve a financial goal or financial freedom, there will be various obstacles and obstacles some of which are uncontrollable.

It is the unpredictability of the obstacles that must be focused on.

Start learning to control yourself for something that is not really needed.

Internal controls are actions taken to detect, prevent, and correct threats that are within or beyond control.

It can be difficult to control something that is out of control, such as when you are sick and have to spend money on hospitalization and buying medicines.

But, you can try to prevent that from happening, for example by taking vitamins and fruits, so that health is maintained properly.

In financial management, you need internal controls to check financial reports, limit access to expenses, and perform reconciliations.

Financial Technology

The technology component is required in financial management.

As a means of supporting the running of a good financial in line with expectations.

Businessmen often use technology in their business development, including the financial management in it.

Today, there are many financial technologies that can be used to achieve financial goals, which are made in such a way.

For example, with financial management applications, companies will find it easier to manage cash flow and accounting.

When compared with a company, personal financial planning is not that complicated.

You can use various financial applications that are available on many mobile or laptop devices.

This financial application will make it easier for you to manage your finances effectively and efficiently.

Financial Report

After you record your expenses, it would be even better if you made the report in a more structured manner.

Not only business companies must have financial statements, every individual also needs to have them.

Including those of you who are married and have children, the financial statements will be very useful.

Financial report usually consist of information related to the financial position, performance, to changes in financial position that occur, including the amount of equality between income and expenses.

This financial report can be used as material for evaluation in the following month if there is an imbalance in the amount between income and expenditure in a full month.

By having financial statements, you can use them to find out your financial condition every month.

The more often you make financial statements, the more you will get used to managing incoming and outgoing finances.