10 Main Objectives of Financial Control

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.

Submitted by : Professor Devika, Category : Financial Control