Financial control offers excellent techniques for controlling the financial activities of an organization.
The main objectives of financial control are discussed below:
i. Economic Use of Resources:
Financial control aims to evaluate and coordinate financial activities. This helps prevent leakage of funds and thus desired returns on investments can be realized.
ii. Preparation of Budget:
Financial control helps the management prepare the budget for a particular department. Budgets provide a basis to compare actual performance with standard performance.
iii. Maintenance of Adequate Capital:
Financial control shows the way to maintain adequate capital, i.e. proper implementation of financial control verifies the adequacy of capital and hence the evils of over-capitalization or under-capitalization can be avoided.
iv. Maximization of Profit:
Financial control compels the management to procure funds from cheaper sources and to apply the said funds efficiently in order to lead to profit maximization.
v. Survival of Business:
A good financial control system ensures proper utilization of resources, which creates a sound and strong base for an organization’s existence.
vi. Reduction in Cost of Capital:
Financial control aims at raising capital from cheaper source by maintaining a proper debt-equity mix. So, overall cost of capital remains at its lowest.
vii. Fair Dividend Payment:
Financial control system aims to distribute a fair and adequate dividend to the investors thereby creating satisfaction amongst the shareholders.
viii. Strengthening Liquidity:
One of the important objectives of financial control is to maintain liquidity of the firm by exercising proper control over different components of the working capital.
ix. Increase in Goodwill:
A sound financial control system increases the productivity and efficiency of a firm. This helps in increasing the prosperity of the firm in the short run and its goodwill in the long run.
x. Increasing Confidence of Suppliers of Funds:
Proper financial control prepares the ground to create a sound financial base of a firm and thereby increases the confidence of investors and suppliers.