The difference between Financial management and financial planning tells about the determination about the finance required in the organization and financial goals.
The Content covered in this article:
Meaning of Financial Management:
It defines the Planning, organizing, directing, and controlling the flow of funds and their efficient utilization for meeting the goals of the organization. Secondly, we can say that it includes investment, use, and distribution of funds for the smooth working of the organization.
A financial manager takes decisions regarding financial matters. Such as analysis of inflow and outflow of funds, sale, and purchase of assets, all expenses, and incomes. The finance is managed through Capital Budget Management, Capital Structure Management, Working Capital Management.
Financial management is generally related to procurement, allocation, and control of financial resources. It ensures:
- The regular supply of funds.
- The optimum utilization of funds.
- In investing in safe areas so that a great Return On Investment can be achieved.
- Planning a good Financial Structure. There should be a fair balance between the debt and Equity Capital.
- Proper finance management helps in the Maximization of the Wealth of the concern.
Meaning of Financial Planning:
It is the process of planning about finance for the Future. It focuses on determining that how an organization will achieve its financial aims. Essentially, it helps in controlling the income, expenses, and investments that can manage your money and achieve organizational goals. Financial determination ensures:
- The requirements of funds whenever they needed.
- Financial Planning helps in controlling the wastage of funds.
- In reducing the risk of uncertainties like changing market trends.
- The benefits of long-term financial plans.
- Delivering the funds at the Right Time at the Right Place.
Now, let’s start discussing the difference between fInancial Management and planning:
The Chart of difference between Financing Decisions and Investment Decisions
Points of differences
|Financial Management||Financial Planning|
|Meaning||It includes investment, use, and distribution of funds.||Only Finance related plaining.|
|What is it?||It is opportunity-oriented.||It mainly focuses on the desired goals.|
|Cover||It covers the wealth, risk Tollerence assessment, and growth strategy.||It covers the cash flow, tax planning, etc.|
|Objectives||To keep and grow existing wealth is the main motive of financial management.||The main motive is to create wealth and meet financial requirements.|
|Functions||Active wealth management is involved.||Passive wealth management is involved.|
|Decisions||Decisions are made on the basis of an investment portfolio||Decisions are financial goals and time management.|
Thus, Financial Management includes investment, use, and distribution of funds for the smooth working of the organization. Secondly, Financial planning is about the determination of finance for the Future. It focuses on making plans that how an organization will achieve its financial aims.
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