What Is Financial Management?

Key takeaways

• Financial management involves guiding either businesses or individuals toward making decisions that can help increase their financial stability, both now and in the coming years.

• Personal finance management involves helping individuals reach financial goals, such as retirement, while corporate efforts focus on optimizing stakeholder value.

• The three types of financial management include financial planning, investment decisions, and dividend management, which help guide a company's funding, resource allocation, and payout strategies.

Finance management entails wealth management and making important resource allocation decisions. Explore the in-demand field of financial management and the available careers you can pursue. Afterward, build your skills in this area with the Financial Management Specialization from Duke University. You’ll have the chance to build financial models and learn the foundations of finance for business during this flexible eight-week course.

What is financial management?

Financial management is about guiding businesses or individuals in making decisions that improve their financial stability now and in the future. It involves decisions about investments, funding, budgeting, risk management, and the allocation of financial resources to optimize financial returns while maintaining financial stability and sustainability.

Financial management involves the strategic planning and directing of financial resources to achieve various objectives. It can refer to both corporate and personal finance management. When working with a company, financial management seeks to optimize shareholder value, generate profit, mitigate risk, and safeguard the company's financial health. When working with individuals, financial management typically entails planning for a personal goal, such as retirement, college savings, or other investments.

Financial manager: role and responsibilities

Financial managers typically have around seven years of experience and may have advanced from roles like financial analyst or business manager [1]. Their responsibilities can include:

• Setting financial goals and objectives

• Developing financial plans and budgets

• Analyzing financial data and trends

• Forecasting financial performance

• Overseeing cash flow

• Monitoring accounts payable/receivable

• Evaluating investment opportunities

• Managing investment portfolios

• Analyzing returns on investment

• Implementing risk mitigation strategies

• Ensuring compliance with regulations

• Managing debt and equity financing

• Managing finance department staff

Financial manager skills

Financial managers need a strong foundation in business, finance, change management, and risk, as well as skills in data, communication, critical thinking, problem-solving, and leadership.

Important technical skills to have as a financial manager:

• Basic and advanced math skills (algebra, statistics, basic computing)

• Proficiency in financial management systems

• Understanding of statistical modeling software and spreadsheets

• Industry-specific knowledge

• Proficiency in accounting principles and techniques

• Understanding of investment principles

Types of financial management

Financial managers handle three main types of financial management for companies: financial, investment, and dividends. These factors reflect the internal decisions a company will need to make about cash flow, profits, investments, and holding debt. Many of these decisions will depend significantly on factors like company size, industry, and financial goals.

• Financial: Assist companies in major decisions that involve acquiring funds, managing debt, and assessing risk when borrowing money for purchases or building the company. Financing is also required when raising capital. Companies can make more strategic financing decisions to raise capital or obtain funds when they have information on cash flow, market trends, and other financial stats on the health of a company.

• Investment: Help companies choose where to invest, what to invest in, and how to invest. Your job as a financial professional is to determine the number of assets (both fixed and long-term) a company will need to hold and where cash flow goes based on current working capital. In essence, this type of financial management is about assessing assets for risk and return ratios. Financial managers will consider a company’s profits, rate of return, cash flow, and other criteria to assist companies in making investment decisions.

• Dividend: Companies should have a dividend disbursement plan and policy in place, with guidance from a financial manager who can create and implement that plan, suggest modifications when needed, and monitor payouts if and when they occur. Any time you make a financial decision, it’s essential to consider dividend payments since you may hold dividends to fund certain financial decisions within the company. It’s also important to have a flexible long-term plan that can grow with the company.

What are the 4 pillars of finance?

Typically, when thinking about personal finance, you can break it down into four essential pillars, which are assets, debts, income, and expenses. You can identify your net worth by analyzing and understanding these pillars of your financial status.

What is the financial management cycle?

The financial management cycle is a financial planning process critical to a company's growth and development. If you align effective financial management with an organization’s goals and objectives, you can lead the company toward greater efficiency and stability. These parts of the financial management cycle must work together to be the most effective.

It includes:

1. Planning and budgeting

During this analytical phase in the financial management cycle, a company uses past and current financial data to set financial targets, modify objectives, and make changes to the current budget. This phase will typically involve both detailed and big-picture planning, meaning a company will look at day-to-day operations and long-term financial plans and try to link financial targets to these activities.

Your goal is to create a strategic financial plan for the company that aligns with objectives for the next three to five years. When setting specific budgets, a company may budget for one fiscal year at a time. A big reason for this is that a budget involves many moving parts that are subject to change in response to market fluctuations.

2. Resource allocation

Financial managers assign value to capital resources (anything a company uses to manufacture/produce goods/services) and offer advice on allocating these resources based on criteria like projected company growth and financial goals. Resource allocation is important because it allows a company to have a long-term financial plan focused on its business objectives. As a financial management professional, you help companies by providing a framework for using capital resources and creating a portfolio that will generate the most revenue, given the company's financial status.

3. Operations and monitoring

This phase is critical to protect against fraudulent activity, errors, compliance issues, or other variances in the allocation of funds, etc. Financial management professionals should run regular financial reviews of business operations and cash flow. These periodic reviews can help mitigate fraud and identify other issues. It is a preventative step that ensures the continuity of business operations by securing the validity and accuracy of a company's financial processes.

4. Evaluation and reporting

Financial management professionals should evaluate a company’s current financial management system and propose changes when necessary. Financial reports and financial data can help you assess the efficiency and success of an existing system.

Some criteria a financial management professional may consider when evaluating a financial management system include security, compliance, company data needs, and the level of support needed. These criteria vary by the company’s size, industry, current financial situation, and long-term goals.

Financial management professionals should be able to offer research-based suggestions that can help a company securely store and manage financial data in compliance with relevant laws and harness that data when needed.

4 careers in finance management

If you're interested in becoming a corporate financial manager, a good place to start is as an accountant or financial analyst. From there, you can advance to senior accountant or senior financial analyst, before eventually pursuing financial manager opportunities.

If you're more interested in working with individuals on their financial goals, you may want to consider becoming a financial advisor. Learn more about the Highest-Paying Finance Jobs.

1. Accountant

Median total pay (US): $92,000 [2]

Job outlook (2024 to 2034): 5 percent growth [3]

An accountant maintains and analyzes financial records, ensures compliance with regulations, and provides financial insights for organizations or individuals. They prepare and examine financial statements, compute taxes, maintain books and records, and ensure accurate financial reporting.

2. Financial analyst

Median total pay (US): $107,000 [4]

Job outlook (2024 to 2034): 6 percent growth [5]

Financial analysts work within a large corporation or with individuals. Their job is to analyze their clients’ financial situations and make financial recommendations based on their goals and financial status. A financial suggestion may include finding investment opportunities. Your goal as an analyst is to evaluate market trends and position a client in a secure financial standing based on the analysis of trends and related data.

3. Financial advisor

Median total pay (US): $202,000 [6]

Job outlook (2024 to 2034): 10 percent growth [7]

Personal financial advisors assist individuals in planning for their future by helping them manage money and seek out investments based on individual situations. As a personal financial advisor, you meet with individuals to set financial goals with short and long-term plans to achieve those objectives. Some financial aspects an advisor may handle include taxes, retirement, college savings, insurance, estate planning, and more. Financial advisors may work for an investment firm or on their own.

4. Financial manager

Median total pay (US): $151,000 [8]

Job outlook (2024 to 2034): 15 percent growth [9]

Financial managers oversee a financial department and may assist in creating strategic financial plans for an organization. Their duties include preparing financial reports and statements, forecasting, setting budgets, analyzing financial markets for trends and investment opportunities for an organization, and seeking ways to mitigate costs.

*All salary information represents the median total pay from Glassdoor as of July 2026. These figures include base salary and additional pay, which may represent profit-sharing, commissions, bonuses, or other compensation.

How to get started in financial management

To work in finance management, you’ll need a bachelor’s degree in business, economics, finance, or a related field. While careers leading up to financial management don't require licensure, certification is highly recommended and can be advantageous. In many cases, employers like to see at least five years of professional experience before hiring for a financial management position.

Educational requirements

A bachelor’s degree in finance, business management, or a related field is often the minimum requirement to work in financial management. According to Zippia, 66.3 percent of financial managers hold a bachelor's degree, while 17.2 percent hold a master's degree [1]. A master’s degree may be required for senior-level positions.

Read more: What Can You Do with a Finance Degree? 7 Career Paths

Certifications

Finance certifications aren't a requirement, but they may be useful if you plan on a long-term career in financial management. Professional trade organizations typically offer certification. The type of certification you earn can be specialized to your job title or role. Common certifications that financial management professionals hold include:

• Certified Management Accountant (CMA): This certification is offered by the Institute of Management Accountants (IMA) and is ideal for anyone wanting to work in financial management. Requirements include at least two years of professional experience and a bachelor’s degree.

• Chartered Financial Analyst (CFA): This certification is offered by the CFA Institute and focuses on investment analysis. It is for financial management professionals who want to work in senior-level positions like CFO. Educational and experiential requirements are also necessary to enroll in the CFA program.

• Certified Government Financial Manager (CGFM): The certification offered by the Association of Government Accountants (AGA) is for professionals who work in government financial management specifically. You’ll need at least two years of professional experience in government financial management to earn this certification.

• Certified Treasury Professional (CTP): This certification, offered by the Association of Financial Professionals (AFP), can benefit anyone who wants to work in corporate treasury. It focuses on risk management, corporate liquidity, and ethics. You'll need to meet educational and experiential requirements for this certification, with several options available for admittance into the CTP program.

Experience

Professional experience in finance or business management is key if you want to advance into upper-level financial management positions. Expect to work at least five years in an entry to mid-level finance position before being eligible to work in finance management. Remember, finance management careers are managerial positions, so developing your leadership skills will also be important.

Explore free networking and career sources

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