Role of Financial Management in The

Efficiency of Financial Performance

Ammad Awan Glasgow

 Financial management is a regulated and
continuous process that includes many
actions such as planning, regulation,
guidance, and control of how to use the
current and future financial sources. It
means applying public financial principles
on various resources of the organization.
Increase gross profit margin
 It refers to the profit gained by the
company's sales from the cost of the goods
sold. This indicates to the efficiency of
using the available raw materials, fixed
assets, human resources and others, and
making a profit through them. It is noted
that this margin varies and it is better to be
higher.
Increase operating profit margin
 This margin clarifies the efficiency of the
company to manage the profits resulting
from the project through when comparing the
ebitda and interest. It is worth mentioning
that the operating profit margin should be
lower than the gross margin, and it includes
management and sales costs, material and
operating costs.
Increase net profit
 It is after deducting all financial obligations
including taxes of profits that the institution
has gained. It indicates to the efficiency of
the financial management of the institution.
Reduce costs
 Making profit is not only managing the
profits of sales but also taking into
consideration the reduction of costs. If the
costs are higher than the profit margin, this
will affect the institution position against
competitors. Many institutions try to reduce
costs by adopting less expensive plan or
service providers to reduce the bills of
electricity, water, internet and others.
Increasing the market share
 Institutions seek to increase their market share;
the market share gives a general idea of
institution position in the market and among
competitors. They tend to enlarge its market by
using other categories of customers, reducing
prices and advertising. It is calculated by
counting the company's sales during a certain
period and dividing by the total sales during
the same period.
Successful financial management
 Write long-term financial objectives such as
debt disposal or early retirement, then short-
term ones such as increasing income or
reducing costs in institutions, and arranging
points according to their priority taking into
consideration that goals like saving for
retirement is important during the
achievement of other objectives.
Set a budget and ensure commitment
 It is one of the most important tools that
ensure financial success, it means balancing
costs with revenue to achieve the desired
goals. Set a budget is essential, because it
ensures that there is enough money to
achieve the necessary things.
Debt repayment
 Debt holds achieving the financial goals.
Instead of paying low sums of more than one
debt at the same time, it is possible to pay all
the money to one debt at first, then pay other
debts.
Reduce costs
 Fixed costs: Such as invoices, rent,
employees' benefits, they have to be paid and
difficult to be reduced.

 Variable costs: Such as using free software

instead of paid ones, they are a variety of
fees that can be controlled and reduced.
In-house financial management
 Distinguishing between needs and desires:
Setting priorities can help achieving pre-
planned goals.

 Managing emergency expenses: They are

unregulated expenses, such as training fees,
car license fees, fines, etc., and saving money
in an account will be useful in such cases.