Principles of Financial Management

Principles of Financial Management

Financial Management in practice is an activity performed and appearing in order to make the finance of the company or organization ideal.

Therefore, in making financial management system, we need the following principles as the basis:

1. Consistency

In this principle, a system and financial policy must be consistent, not change from period to period, but keep in mind that the financial system does not mean that there is no adjustment if there is a significant change in the company.

2. Accountability

This principle is a moral or legal obligation, which is inherent to the individual, group or company to give explanation of how the funds or authority given to a 3rd party used.

3. Transparency

Management should be open to the work, provide information about the plan and all the activities concerned, including providing reasonable, complete, timely and accurate financial report which can be accessed easily by an interested party, if it is not transparent, it can indicate that management has hide something.

4. Viability

To maintain the financial company, all operational outcome or at strategic level must be adjusted to the existing funds.

5. Integrity 

Every individual should have integrity level that is capable in running operations. In addition, the records and financial report must be maintained the integrity with the completeness and the accuracy of financial records.

6. Stewardship

Financial management should be able to manage capably of the funds obtained and provide assurance that funds received will be used to realize the goals that have been set.

7. Accounting Standards

Financial accounting system used must be in accordance with the principles and standards of applicable accounting rules to make the financial report produced easily perceived and understood by all interested parties.

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