Short And Long Term Financial Management
The short-term financial management refers to the process through which decision on the business organization including budgeting and financial plans are usually made to be implemented and executed for not more than one year.
The long-term financial management refers to the process through which the organization makes decision to meet the financial needs of the business enterprise through understanding the financial environment, putting in place long-term financing, capital budgeting decisions, share repurchase policy and investment for more than five years.
Comparison
- The short-term financial management involves managers making brief and precise budgets that are usually allocated short term costs including overtime cost, marketing with given discount and inventory purchases to ensure the cost are met within the limited time. In long-term financial management, the budget allocations are always long-term so as to cover the project for a long period.
- In short-term financial management, the data indicating past sales and orders by the customers is always compiled to help in the development of short-term revenue for the business while in long-term financing the service delivery is always broadened to increase sells and orders and is maintained using a long-term revenue.
- In short-term financial management, the number of employees is always reduced. This is done to minimize the cost of paying them which is an extra expense. Therefore, the number is reduced to allow the management to work within the planned budget. In long-term financial management, the management always increases the number of employees to cover the outlined objectives of the organization, and through this, the budget is always raised to support the welfare of the organization’s staff and operations.
