How Can Financial Management Organize Your Company’s Income and Expenses?
How Can Financial Management Organize Your Company’s Income and Expenses?
discover | Sunday - 27 / 04 / 2025 - 8:58 am
Financial management represents a pivotal element in the success of organizations, where their performance – meaning the organizations performance – is measured by the extent of financial management’s ability in achieving the organization’s strategic goals through the optimal investment of their financial resources.
With the development of the business world, the scope of financial management work has expanded to include various areas such as; monitoring financial markets, managing mergers and acquisitions, evaluating various investment opportunities, in addition to exploring and evaluating available funding sources.
In this article, we will highlight the concept of financial management in Logix’s Enterprise Resource Planning (ERP) systems; where the system – Logix – manages all financial aspects, including income, expenses, assets, and liabilities.
But what is financial management?
At its core, financial management is the practice of setting strategic business plans, and then ensuring that all departments adhere to the defined course. Effective financial management — whether overseen by the CFO or the Vice President of Finance — enables the provision of accurate data that supports the formulation of a long-term vision, contributes to informed investment decisions, as well as provides insights into the mechanisms for financing those investments, managing liquidity, achieving profitability, monitoring cash flows, and other vital aspects.
In this context, Enterprise Resource Planning (ERP) programs play a fundamental role in helping finance teams achieve their goals. The financial management system integrates multiple financial functions such as accounting, fixed asset management, revenue recognition, and payment processing.
Thanks to the integration of these key components, the system provides a comprehensive and real-time view of the company’s financial position, along with facilitating daily operational tasks — such as financial closing at the end of each financial period — thus enhancing efficiency and accuracy in decision-making.
What are the types of financial management?
Financial functions can be classified into three main areas within financial management, as follows:
First: Capital Budgeting:
Capital budgeting involves planning the company’s financial path to achieve its short-term and long-term goals. It includes determining the optimal way to invest capital to support the company’s growth.
Second: Capital Structure:
It focuses on determining the best ways to finance operations and growth, and managing debt and assets. When interest rates are low, borrowing may be the best option.
The company may also resort to other options, such as financing from private equity firms, selling some assets such as real estate, or offering shares for sale when needed.
Third: Working Capital Management:
It is concerned with ensuring the availability of sufficient cash liquidity to cover the company’s daily operations, such as paying employee salaries and purchasing raw materials necessary for production.
Some may wonder about the scopes of work of financial management, and below we answer these questions.
The scopes of work of financial management are considered as fundamental pillars and integrated areas.
Financial management is concentrated in four main areas:
1- Financial Planning:
The financial manager assumes responsibility for forecasting the company’s financial needs in order to ensure the continuation of positive cash flow, and allocate resources for growth and the development of products and services, all in parallel with developing plans to deal with unexpected changes. This planning includes several aspects, including:
– Income and expenses.
– Travel and accommodation expenses.
– Labor costs.
– Indirect operating expenses.
2- Budget Management:
The financial manager distributes the available financial resources to cover various obligations, such as:
– Salaries and wages.
– Raw materials.
– Employee travel and accommodation expenses.
– Other operating expenses.
All of this is done while ensuring the allocation of a reserve for emergencies and future growth opportunities. It is worth mentioning here that companies usually have a main budget with documents covering specific aspects such as cash flow and operations.
3- Financial Risk Assessment and Management:
The Financial Manager is responsible for analyzing and managing a variety of risks, with the following at the core:
3.1- Market Risks: These include market impacts on the company’s investments and financial performance, as well as sector-specific risks such as the impact of pandemics or shifts in business models.
3.2- Credit Risks: These relate to the impact of customer payment delays on the company’s cash flow and creditworthiness.
3.3- Liquidity Risks: These require continuous monitoring of cash flow and estimation of future needs.
3.4- Operational Risks: These encompass a wide range of challenges, such as:
3.4.1- Cyber security.
3.4.2- Disaster recovery plans.
3.4.3- Corporate crisis management.
4- Financial Procedures:
The Financial Manager establishes a regulatory framework that defines:
4.1- Mechanisms for processing and distributing financial data.
4.2- Authorities for making financial decisions.
4.3- Signature and approval procedures.
In the above paragraphs we reviewed the financial management and its fields. Now, it’s time to inform you through the following lines about functions of financial management. Keep reading this article, as more valuable information awaits you!
What are the functions of financial management?
Practically, the functions of financial management revolve around three main pillars: planning, forecasting, and controlling expenses.
Firstly, the function of financial planning and financial analysis focuses on preparing income statements (profit and loss statements), analyzing the extent to which production or service lines contribute to enhancing profit margins or increasing net profits, in addition to preparing the budget and financial statements, forecasting the company’s future financial performance, and simulating potential scenarios.
As for cash flow management, it is a function no less important than the previous one; where the financial manager must ensure the availability of sufficient liquidity to cover daily operating expenses— such as paying employee salaries and supplying of raw materials — all of which is done with regular and accurate review of cash flow in and out of the company, a process known as “cash management.”
In addition to the above, financial management includes revenue recognition in accordance with generally accepted accounting standards, which determine the appropriate timing for including revenues in financial statements. Also included in this framework is the management of the accounts receivable cycle, which is a key element in achieving a balance between liquidity and strategic investments.
These tasks may seem simple, but their practical application faces challenges (especially in companies whose customers are late in payment for months after receiving services), which raises many questions such as: when is this money considered the property of the company? And how are investors informed of these revenues in a transparent and accurate manner?
Now that you have reviewed the latest concepts related to financial management, we will explain to you the relationship of Enterprise Resource Planning (ERP) systems with financial operations within companies.
The role of ERP systems in improving financial operations and driving efficiency:
Automating the entry of financial data of multiple sources such as invoices, purchase orders, and sales is an essential step to enhance efficiency. This automation reduces errors resulting from manual entry and speeds up the data recording process.
As for the updates to the general ledger, they are done in real-time, ensuring the accuracy of information and quick access to it. Since the general ledger is the central repository for financial transactions, its immediate synchronization contributes to keeping balances and reports up-to-date, providing a reliable financial foundation.
ERP systems provide advanced capabilities for preparing financial reports, allowing them to be easily customized, from income statements and balance sheets to cash flow and financial ratios, which in turn facilitates accurate financial decision-making.
Are you looking for a financial management system that meets your needs and embodies your vision for success and excellence?
At Logix, we offer you the perfect solution to achieve that!
Logix Financial System: An Integrated Solution for Successful Financial Management.
With the increasing financial challenges facing companies today, Logix financial management system provides an integrated solution that combines efficiency, security, and flexibility. Thanks to its advanced technologies, our system helps your organization achieve its financial goals effectively, while ensuring data accuracy and protection to the highest standards.
But what are the advantages of the system?
Here they are:
– Financial accuracy and efficiency.
– Reducing accounting errors and speeding up the work cycle.
– Issuing instant and accurate financial reports.
– Effective management of expenses and budgets.
– Full compliance with local and international accounting standards.
– Flexibility in implementing regulatory updates.
– Accurate auditing of financial operations.
– Advanced protection against fraud and theft.
– Seamless integration with human resources, inventory, and sales systems.
– Scalability to grow with your business.
– Integrated management of multiple companies.
Logix system is characterized by its ability to adapt to the changing needs of your organization (whether you are planning to enter new markets or seeking to manage multiple operations).
With Logix, you can rest assured that your financial management is in safe hands.
In conclusion:
Financial management is the foundation for effectively organizing your company’s income and expenses, contributing to ensuring its financial stability and supporting its continuous growth.
By adopting careful planning, preparing budgets meticulously, and monitoring cash flows regularly, you can maximize the utilization of available financial resources and make well-thought-out strategic decisions that enhance your business trajectory. Therefore, adopting sound financial practices and leveraging modern tools and systems, such as Logix system, are essential factors in boosting the efficiency of financial operations, facilitating the achievement of long-term success and excellence.
Choose Logix system today to improve the management of your financial resources and achieve tangible savings in operational costs!
