What is business finance? What are the examples of business finance? How can you get money to start your business with little or no stress? We will be discussing all of these in this article. Stay tuned and pay close attention.Before starting a business you must know what business finance is and how you can raise funds for your business.
Accounting and finance, marketing, and advertising are part of a business that is indispensable, for you to start and grow a business successfully you need to take out quality time to learn all these. Starting a business will be much easier if you know how to come up with business ideas that will lead to the growth and success of your business, every business that is in existence today started as an idea in the mind of one man, business finance will teach you how to raise funds for your business and the different types of business finance out there. If you follow this article closely you will find it very easy to start and scale a business.
What Is Business Finance
Business finance is one of the functional areas of business, along with marketing, management, human resources, information technology, and production management. It is one of the most important areas of business, as we all know, sales are the lifeblood of a business and in this article, finance represents sales, the more sales that come into an organization the more revenue that pours in, and the more the business grows. Business finance is an important functional area as finance is essentially the lifeblood of businesses.
The finance function linked to accounting is responsible for pumping money into the other operational areas of the company.Appropriate funds are provided by the finance function for day-to-day operations and special projects. The goal of a company should be to allocate money to other functional areas of a company in a way to maximize wealth creation and revenue growth. There are many parts of a company that business finance can help to function better and bring in more revenues. Areas like
- Business administration
- Business management
- Skills acquisition
- Marketing and advertising
The work of business finance is not only to pull money into the company or an organization, business finance helps to channel this money into other parts of the company to bring in money which will lead to an increase in revenue. Business administration is a part of Marketing that is responsible for administering and appointment of jobs to various people and sectors in the business.
The goal of a business administration is to equip the entrepreneur to be responsible for the administerial duties of the company. It doesn’t matter if you are new to business or you have been in business, business administration is very important to ensure the growth and development of a business.
There are many facets of marketing and business administration is one of them, whenever you want to start a business, it is important you learn what business administration is, it doesn’t matter if you are just managing a small business, having an idea of what business administration is will set you on the right path to total financial freedom as your business and companies grow.
Do you want to own a conglomerate of businesses? Do you want to scale your business to a multi-million dollar company? Then you need to know what business management is, there are administrative and managerial duties in an organization. When you channel money from business finance into business management, you are building and strengthening a part of the company, which will, in turn, lead to an increase in sales.
If you are running a large company with many employees you will find business management very important. You will have to inculcate the spirit of management into your employees, it has to start from time management, the ability to manage time when mastered is the first step to success, business finance allows you to channel some of the company’s revenues to these areas, to teach your employees what managerial duties is, when your employees can effectively manage their time and your business, your business will grow to be a success and pass the 10 years benchmark.
When starting a business, make sure you have a vision of where you want your business to be, having a vision keeps you focused, even though you later raised the capital of your business through business finance you will manage it effectively because you have taken quality time to learn business management, coupled with your vision, you will be an unstoppable force for excellent. Business Management is an integral part of business, a necessity for anyone who wants to start and scale a business.
One of the benefits of business finance is skills acquisition. If you are running a large organization, you will find out that occasionally you need to train new staff, sometimes 1 to 3 months training, sometimes more and the money for this training is gotten from business finance.
Finance and accounting will teach you accountability, the ability to know where to channel the money gotten from revenue, and channeling some of the more into skills acquisition for your employees will lead to more productivity and in the long run, help boost the company’s revenues.
But how will you know you must channel some of the money that comes into the organization to skill acquisition if you don’t know what business management is and have an understanding of what business finance is? This is why it’s of extreme importance to learn as much as you can before you think of starting a business.
Marketing and Advertising
Business finance helps to channel some of the company’s revenues into marketing and advertising, one striking thing about marketing and advertising is that they’re the bedrock of a business, they’re what brings sales into the organization.
One of the reasons most business owners find it difficult to make sales is because they don’t know what Marketing and advertising are, if you don’t understand the concept of marketing you will not understand your market, the first step in making sales is the understanding of the market you are into, followed by advertising to create awareness of the arrival of your product to the marketplace.
Always remember that when it comes to marketing, it’s a game of numbers, the more audience you can reach out to, the higher your chances of making sales, so your goal as a business owner is to pump in as much money as possible into those things that bring in revenues for the company, things such as Marketing and advertising.
Business finance is a concept that teaches you how to get capital to start your business and where to put in more money to ensure the proper growth of your business. A company’s goal should be to allocate money to the functions of the company in a way that maximizes the wealth of the owners. Corporate finance is responsible for this.
What Is Corporate Finance?
Business finance is one of the most important areas of a business as money is the driving force of a business. Accounting is responsible for the generating and keeping of financial data of an organization, to know where the organization is doing well, where the money is going and to be called upon when needed.
Accounting equality helps to prepare a statement of account for the organization. The business finance function is responsible for managing the company’s funds, the process of raising funds for the company and managing the risk that the company should take to return an appropriate amount of money to the owner(s).In a small business, business owners and managers should have a basic understanding of corporate finance, even if they outsource certain areas of their financial operations.
For example, a small business may outsource at least some of its bookkeeping and bookkeeping. Familiarizing yourself with the basics of business finance can give an owner some additional tools to understand the financial complexities of owning a business.
The Three Main Areas Of Business Finance
- corporate finance,
- investments and
- financial markets,
- risk management.
Corporate finance is a branch of business finance that deals with the proper planning, managing, and controlling of a company’s financial assets. Corporate finance includes working capital management, statement of financial analysis, business budgeting for marketing, and capital budgeting to keep a record of how much the business started with and how far the company has grown. In a small business, the business owner conducts the financial operations of the business, as the business grows the day-to-day financial running of the business decision is now made by the manager and other financial committees. Some of the important and huge financial transactions may require the approval of the company’s board of directors.
Corporate finance includes running the following areas of the finance function:
- working capital management
- cash budgeting
- financial analysis
- Development of the annual accounts
- investment calculation
- dividend policy
In a small business, the owner uses this financial information to track cost, income, and expense account balances in the income statement, as well as information from the cash flow statement.Performance is measured by developing metrics such as the electricity quota, the ability to pay your financial obligations on time.The balance sheet, income statement, and cash flow statement are prepared for accounting purposes.
These statements are required for public companies, they have issued shares to investors in a public trading market, but they can also be used to analyze private companies of all sizes.Financial analysis is used as a method for determining the liquidity level of a company and its investment capacity, financial analysis is also used to view the financial performance of the various departments that make up the company. Investment and the financial markets. The second area of corporate financing is investments or the investment decision, in which the financial markets and financial institutions are also involved. This type of marketplace or company allows for easy money transfer when making investments.
The investment decision in a company is the process of investing in assets that will generate a return at least as high as what the company has to pay to obtain financing.To understand investments, we need to understand the financial markets in which they are traded along with our financial institutions. From an economic point of view, financial markets help to facilitate the transfer of money between money savers and money users. Savers are typically households, while users are generally the government and corporate sectors.
Here are some examples of investments a small business can make
Companies can invest in the shares or equity securities of other companies. A return may include dividends and capital gains. The company investing owns part of the company in the case of a stock investment.
Companies may invest in bonds or debt instruments owned by other companies. Yield includes principal repayment at maturity and interest payments. The company investing owns at least a portion of the company’s debt.
These are short-term, liquid investments usually made with a bank or other financial institution, and maturing in a year or less.The return is usually in the form of interest.
Commodities are products with relatively volatile price fluctuations, such as pork bellies or coffee. Their prices rise and fall quickly. For example, a trader would agree to buy coffee when it is brought to market and at a previously agreed price. Commodities are risky investments – not always suitable for small businesses – as the price can go up or down, causing heavy losses.
Derivatives are products of neighboring markets. Trading is conducted in the form of a contract between two parties and the value of the derivative is based on the value of the original investment. This agreement creates a benefit for both parties.
Derivatives increase or decrease risk depending on the terms agreed between the buyer and seller.Financial institutions such as banks, investment companies, mortgage lenders, credit unions, and brokers operate in the financial markets. These financial institutions generally act as intermediaries, helping to facilitate money transfers between businesses and savers (acting as brokers or commercial agents).
Within organizations, risk management is the process of identifying, analyzing, and mitigating risks faced by your business, including your investments. A financial or business manager must be able to identify the risks faced by the business and then make an attempt to quantify them and find a way to reduce the risk factor when necessary.
The risks a company takes determine its risk tolerance and potential returns. The return on a company’s investments or capital projects must be at least equal to the risk associated with the investment or project. Otherwise, the company loses money. If the return is higher than the quantifiable risk assessment of a project or investment, the company will make money.
We have come to the end of this article on business finance, we have seen how important it is to understand this concept of business finance and to understand that marketing, advertising, business management, and business administration are integrated, which means that for you to start and grow a business you need to learn some of these things to ensure the growth of your business.