What is Managerial Finance?

"Managerial finance" is a term that is used to encompass the overall policies and procedures that are associated with corporate finance and management accounting. The general concept is the competent management of financial resources within a company or other type of organization, making use of the management structure of the entity as the means of responsibly managing those resources. To this end, managers will often make use of a number of tools that make it possible to track expenditures, assess compliance with budgets, and generally make sure that each department or section of the operation is functioning within acceptable limits.

An example of managerial finance within a company structure would be a regional sales manager who is held accountable for not only the generation of sales within his or her region, but also the way that assets allocated to the region are used in the sales process. Here, the manager would seek to make the most prudent use of funds set aside for promotional activities such as participating in trade shows, local chamber events, or even the creation of sales collateral for distribution to prospective clients. The manager would also monitor the activities of individual salespeople working in the region, making sure each is complying with the standards required to earn the base salary as well as any commissions related to the sale of new accounts. Typically, managers will use software programs to organize and track data, so that it is possible to always know what type of returns are being generated, making it possible to adjust use and expenditures when and as needed.

Along with relating to the management of assets within a company or association, the idea of managerial finance can also be related to the activities of the individual investor. Here, the idea is to manage the structure of an investment portfolio so that the combined assets consistently generate returns that incrementally increase the value of that portfolio. This means balancing the assets in a manner that makes it possible for gains on some holdings to offset losses with other holdings, resulting in a net increase rather than a net decrease.

In any setting, managerial finance has the goal of protecting the integrity of the financial assets at hand and making sure they are used to best advantage. Accomplishing this goal often requires adjusting processes and procedures to either deal with unforeseen events or to prepare for projected events that could have an impact on the financial stability of the company or entity. At its best, managerial finance makes it possible to know what is and is not working properly, and to make the changes necessary to avoid waste and increase profits at each level of the operation.