# Relationship of Financial Management with Related Disciplines
Financial management is not a totally independent area — as part of overall management it draws heavily on economics, accounting, production, marketing and quantitative methods. Though inter-related, there are key differences.
## Financial Management vs. Accounting (the closest relationship)
| Aspect | Financial Management | Accounting |
|---|---|---|
| Relationship | Relies on accounting data for decision-making and planning | Provides essential financial data for decisions |
| Treatment of funds | Focuses on cash flow — revenues recognized when cash is received, expenses when paid | Based on the accrual principle — revenues when earned, expenses when incurred, regardless of cash flow |
| Purpose | Ensures solvency and manages cash flows to meet obligations and achieve goals | Collects and presents financial data (past, present, future operations) |
| Key focus | Long-term financial planning, control and decision-making to maintain solvency | Reporting data and preparing financial statements (balance sheet, income statement) |
| Decision-making | Primarily responsible for financial planning, control and decision-making | Focused on data collection and presentation, not direct decision-making |
| Goal | Helps the firm avoid insolvency via healthy cash flow and achieving financial goals | Provides reports that inform decisions but does not itself decide |
The crucial difference: FM works on the cash basis; accounting works on the accrual basis.
## Financial Management and Other Disciplines
| Discipline | Role in FM | Impact on day-to-day decisions |
|---|---|---|
| Marketing | Provides insights into capital required for new products, promotions, etc. | FM evaluates the capital needed for marketing plans and their effect on cash flows |
| Production | Changes in production may require capital expenditure | FM assesses and finances the capital needed for production improvements |
| Quantitative Methods | Provides analytical tools and techniques | FM uses them to analyse complex financial problems and decide |
| Economics | Offers knowledge of external factors affecting the business environment | Helps FM understand broader economic trends and external factors |
| Accounting | Primary discipline supplying financial data via reports | Essential for decisions — gives past performance, projections and liquidity |