Why finance is important in the business?
Finance is both the process of managing financial resources as well as the process of obtaining funds. There are three main categories of finance: corporate/ business, personal and public. Finance is an important and inevitable function across categories. In the business sector especially, stress is laid upon effective and efficient financial management of the organization’s financial resources and activities to ensure business success and sustenance. Therefore, the finance department with its finance and accounting professionals is one of the most crucial teams in any business and will always be in vogue to be a finance professional. There has always been a demand for finance courses in college and university, but today, with the proliferation of the internet, it has become possible for even non-finance personnel to gain a nuanced understanding of accounting and finance concepts through financial management courses online. Of course, a strong vision and leadership, as well as a winning product package, is important for any business, but finance is its lifeblood. Here is why finance is so important in the business:
The seed for starting a business: It is popularly said that money is essential for making money. For a business to kickstart its activities such as product testing, production, sales groundwork, marketing campaigns, etc., an initial inflow of capital is required as a seed in the form of debt or venture capital or savings of the founders. The source of this initial capital has implications for the level of control the founders will have on the business.
For day-to-day operations: There are several short-term expenses and monetary commitments for the business, known as operational expenses, and includes wages and salaries, raw materials, inventory, electricity, interest and rent payments, etc. For meeting these operational expenses, businesses need to have a working capital. In the initial stages, the business may not make enough revenues to meet the working capital needs and will be using up its capital. If they are not prudent about these expenses, they may burn out all their cash and will be able to sustain themselves. Proper short-term financial planning and maintenance of good working capital flow is crucial to keep the operations going.
For scaling up: Scaling up production in the long-run by purchasing new machinery/ technology/ land will help businesses in cost minimization and profit maximization and in the process create assets, help the business grow and penetrate existing markets to the fullest. The business must have sufficient capital budget to do so and cannot depend on short-term finances for this. They must have retained earnings and should be able to raise further capital from external sources.
New markets: For profit maximization and greater brand penetration, the business must explore new markets both geographically and demographically. This requires sufficient capital and financial management.
New products: R&D and testing for new products and solutions require adequate funding.
Considering how important finance is to businesses, you should enroll yourself in a financial management course online and give yourself an edge in your profession.