Finance
- General Overview
Finance is a generally applied term for more than a couple
of things. The term finance applies to the commercial activity
of providing funds and capital; also it is that branch of
economics that studies the management of money and other assets.
If one were to round up the different definitions into one,
finance can be defined as the management of funds and capitals
required by a business activity.
Management of Finance
Management of finance has developed into a specialized branch
within management since long ago. Managing finance involves
dealing with optimizing allocation of funds to various activities
either by borrowing or by mobilizing from internal resources.
The word optimizing in finance may strike an odd note but
it means taking intelligently structured steps at minimizing
the cost of financing while simultaneously attempting to maximize
the profits out of the employed finance.
Finance Governs Most of the Activities
A poor finance management will immediately show as deteriorating
conditions in the procurement, production and sales as it
touches all spheres of business activities. For this reason,
afinance manager is expected to be very judicious in either
mobilizing funds or allocating for expenses. Lee Iacocca,
the most revered management guru, callsfinance managers as
'bean counters' who look at the expense part with rather pessimistic
view. Unlike the sales managers, who would like to invest
in future by product development, finance managers are rather
skeptic of financing a project whose benefits lie in the future.
Finance management governs the future outcome too.
Finance in Small Business
For most small business owners there is not a clear distinction
between personal finance and business finance often leading
to cross utility of funds. Lenders, either future or present,
don't look at this with a soft corner. But resisting the tendency
for such utilities may dampen ones zeal temporarily but sure
brings the much needed discipline which is the foundation
of all future progresses.
Financing a business can often be perilous if not approached
with caution. Although bad management is commonly given as
the reason businesses fail, inadequate or ill-timed financing
comes a very close second. Whether you're starting a business
or expanding one, sufficient ready capital is essential. But
it is not enough to simply have sufficient financing; knowledge
and planning are required to manage it well. These qualities
ensure that you will avoid common mistakes like securing the
wrong type of financing, miscalculating the amount required,
or underestimating the cost of borrowingmoney.
Financing
Small businesses can finance their needs from either internal
resources, friends or from banks and private lenders. The
less you finance from outside lenders the more it ignites
the profitability. This is why, perhaps, Bob Hope famously
said, "A bank is a place that will lend youmoney if you
can prove that you don't need it."
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