A brief overview of business finance
“Watch your finances like a hawk.” – H. Jackson Brown, Jr.
When it comes to business, we all are slaves of money and funds. Admit it, you might be an amazing entrepreneur, who has a brilliant ground-breaking idea for business, but if you don’t have enough finance, your business dream will remain a dream. A business flourishes only when you have mastered the art of finance management. For a successful business, you need to learn how to meticulously research and plan your financial needs, keeping in mind your investments and assets.
Following are some questions related to the basics of business finance and how to raise money for your business.
What is business finance?
- Business finance is a broad concept, which focuses on the management of your finances with respect to your business.
- Business finance covers topics like asset management, budget analyses, foreseeing the financial risks, and so on.
- Without understanding the concept of finance, you cannot plan on gaining profits and achieving success in your business.
What are the characteristics of business finance?
- You cannot skip having a business finance irrespective of whether you have a small organization with only a handful of employees or you own a big corporate business.
- A business finance of two different companies will always differ. This is because the business finance of a firm depends on the size and the nature of the business.
What are the different types of business finance?
There are three different types of business finances:
- Long term business finance – Long term business finance is the money you need to buy fixed assets for your company. Fixed assets include purchase of land, machinery, furniture, etc. These items are durable and are one-time investments.
- Medium term business finance – Medium term business finance is used to improve the present machinery and technology used. Medium term finances have a time which lies between long term and short term.
- Short term business finance – As the name suggests, short term business finances have a short time period and include finances which are used to carry out day to day operations of a firm.
Why you need business finance?
- Daily expense – This involves purchase of raw materials, salaries of the, monthly bills, etc. These are the basic expenses, which a company cannot escape from.
- Meet unforeseen needs – In business you never know when you may stumble upon a situation you never prepared for. At such times, it is crucial that you have some savings which will help you sail through the situation. It is advisable to always set aside some money out of your financial assets, which will only be used in case of emergency.
- Expand your business – If you are planning to expand your business, then you will need money. Just imagine a business opportunity comes your way, but it requires you to submit a minimum deposit. If you are short of funds, you might miss the opportunity.
- Sales and promotion – In today’s competitive era, just doing business is not enough. You need to make your presence known to the industry. You will want to advertise your business, come up with promotional activities, and involve in many such activities which will give you good publicity.
How business finance helps?
- A proper knowledge of business finance is a must when you start your own business.
- Business finance will help you make profits and give you a better understanding of your finances.
- It helps you study your financial requirements and accordingly plan the fund raising you would need.
- It also helps in your investment decision.
- The best part about being well acquainted with your business finance is that you would be well prepared for the future financial crisis because of the financial foresight you will possess.
Being well-versed with the concept of business finance is a must for all those who dream of becoming entrepreneurs.