Three Principles of Financial Management

Financial management is all activities related to obtaining working capital funding, using or allocating funds, and managing assets owned to achieve the main goals. Financial management is related to the process of entering and leaving money and investment, production funds and other sources of funds. Newly developed businesses must have good financial management, because if company funds are not managed in accordance with the objectives, it can result in inflation in the company, in which the expenditure rate is higher than income. The following are three financial management principles that need to be considered:

  1. Accountability

Accountability is a moral or legal obligation that is inherented in individuals, groups, or companies to archive the use of funds, tools, or authority given by third parties. The company must be able to mention the origin of the funds and their use as accountability to the people concerned and beneficiaries. All interested parties have the right to know how funds and authority are used.
 

  1. Transparency

The company must be trasparent about its work, provide information relating to its plans and activities to interested people. This includes preparing financial reports that are accurate, complete and timely, and can be easily accessed by interested management and beneficiaries. If the company is not transparent, this indicates that something has been hidden.
 

  1. Accounting Standards
The accounting and financial system used by the company must be in accordance with the accounting principles and standards that is applied in Indonesia. This means that every accountant throughout the world can agree and understand the system used.