Businesses, charitable organizations, families, and individuals all must manage their finances to help meet their different financial goals. While the goals may be different, the different financial management techniques can apply to any business or any person. Examples of these techniques include setting financial goals, creating a budget, and performing ongoing maintenance of that budget by tracking spending or bookkeeping.
Setting financial goals is at the heart of both business finance management and personal finance management. Creating financial goals starts by deciding on a list of objectives for how money should be both earned and spent and then developing a plan for meeting those objectives. For example, the financial objective for a business could be to make more in sales then the company spends on supplies, while a financial objective for an individual could be to build an emergency savings account. Once objectives are determined, the business and the individual can create a timeline for meeting the objectives, such as several months or several years.
Budgets are vital financial management techniques for businesses, charities, families, and individuals. Creating a budget requires the financial planner to determine the amount of income brought in each month and to subtract all of the monthly expenses from that income. For example, a business may estimate their average monthly sales and subtract the cost of leasing a retail space, paying utility bills, paying employees, and purchasing supplies from that income. A family may calculate the monthly take home pay for every working adult and subtract the cost of mortgage payments, insurance premiums, utility bills, groceries, and other household expenses. As is the goal with most financial management techniques, having a budget helps keep the business or family unit from overspending and becoming overwhelmed with debts or other financial obligations.
Tracking spending is another of the financial management techniques that apply to both businesses and individuals. Businesses often track spending through bookkeeping, which is the process of recording both incoming money and outgoing expenses. A business may keep these records as a way to ensure that the company stays within the projected budget and as necessary record-keeping for the Internal Revenue Service (IRS)
Individuals and families often track spending by keeping a written or typed record of every expense throughout the month. For example, a family may track all of their paid bills as well as necessary expenses, such as groceries and variable expenses such as dining out. Tracking expenses can also help a family or individual stay within their budget.
