EFFECTIVE BUSINESS FINANCE IN TRYING TIMES
- August 29, 2020
- Posted by: mealone
- Category: Business
Business finance is one of the most important factor to consider in setting up a business as without finance business cannot grow.
As stated by B.O. Wheeler Meaning of Business Finance includes those business activities that are concerned with the acquisition and conservation of capital funds in meeting the financial needs and overall objectives of the business enterprise.”
A business is identified with the generation and circulation of products and services for fulfilling of needs of society. And for successfully doing any operation, business requires money which is known as business finance. And therefore, funds are known as the lifeblood of any business. And a business would not function unless there is adequate money accessible for use.
Also the capital contributed by the businessman to establish the business isn’t adequate to meet the financial needs of the business. And consequently, the businessman needs to search for an option to generate funds. Therefore a research of the financial needs and options to fulfill those needs must be done with a specific end goal to arrive at effective financial management to maintain the business.
Furthermore the fundamental necessities of business would be to buy a plant or apparatus, or it could be to buy raw materials, development of a business that prompts more enrollments, paying wages and so on. Also the money related necessities of a business can be classified as follows:
- The Fixed Capital Requirement: in order to begin a business, money is required to buy fixed assets like land, building, plant and machinery. And this is called the Fixed Capital Requirement.
- The Working Capital Requirement: every business needs funds for its day to day activities. And this is known as Working Capital Requirements. The working capital is required for the purchase of raw materials, paid salaries, wages, rent, and taxes.
- The Diversification Fund: Also a company needs more funds to diversify its activities to become a multi-product company e.g. ITC.
Also while accounting tracks and organizes your company’s financial information, business finance uses this information to help you manage your money and make your operation more profitable. And most business finance includes reading financial statements and connecting the dots between your profit and loss, balance sheet and cash flow statements. And if these documents point to a shortage of capital, business finance also provides the tools to plan strategies for bridging the gap.
Effective tips to successful Business Finance
Strategic Business Planning
The business finance is an important tool for strategic planning, providing the financial grounding for your projections and plans. And if you intend to introduce a new product, it can tell you how much you’ll have to spend to get things off the ground, synthesizing information about research and development, marketing upgrades and equipment costs. Also business finance also helps you make forecasts and calculate how much of this new product you’ll have to sell to recoup your startup costs, and also how long it will take to break even on the venture. Therefore the strategic plans you create as a part of business finance help you determine whether or not your company is meeting short-term and long-term financial goals.
Also if your business encounters cash flow difficulties, business finance is an important tool for understanding and managing your financing options. Therefore by calculating interest and principal payments, and incorporating this information into current and upcoming financial statements, you can make savvier choices about how much to borrow, which borrowing options make the most sense for you and how to plan your repayment schedule. And this planning and strategizing will leave you with more money in the long run, which you will be able to manage most successfully if you’re skilled at business finance.
Importance of Strategic Business Finances
As we now know the meaning of Business Finance, let us highlight its importance. Also business finance is an essential requirement for the establishment of any business. And even though money is actually the most important tool to bridge the gap between production and sales. Let us highlight some of the important functions of business finances.
- Firstly we require business finances to meet certain contingencies and any unexpected problems that may arise
- Also it is necessary for the promotion of sales
- Finally a requirement to avail any business opportunities that may present themselves