Functions of Business Finance

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Introduction:

The ultimate goal of any business is to be profitable at all times and earn money; it is money that helps a business to grow and expand. In order to be successful, an organization needs to able to manage money in a sophisticated manner and so all organizations have a finance department that takes care of different monetary transactions.

The financial department in any company consists of various sub-departments or teams to take care of many functions, apart from buying and selling of products, thus business finance is the broad term that describes all functionalities of the finance department of a commercial enterprise.

The two main functions of business finance:

Investments: Functions include finding investment options for the company such as, creating new products, asset acquisition, increasing local purchase of securities or shares, etc. Also the decisions of investing in mergers and acquisitions for the expansion of the company have to be scrutinized by this department before the Board of Directors can finalize them.

Financing: This team deals with seeking funds for the company from various sources like banks, financial institutions, investors, share holders, capital market etc. and then assessing the funds so that the company can get borrowed capital at the lowest interest rates possible and with minimum liabilities.

Additional Functions:

Accounting: This team keeps a track of all monetary transactions in the form of accounts so that the expenditures of an organization can be tracked, to calculate the net profit at the end of the year. Keeping a track of the expenses helps the company to set the prices of all the products and the services offered, in a way that the net expenditure should be less than net income.

Payroll: They handle the salary payments of the all the employees of an organization; functions like calculating yearly bonuses, salary increase and also rolling out pay structure for new joiners are accomplished by them; this is done by working in coordination with the recruitment team.

Billing: This sub-department takes care of the billing process and prepares an itemized bill, which is sent to the clients at the end of the month, for the purpose of payment. It is of enormous importance in the service industry where an error in the bill can strain commercial relations with clients.

Thus, effective management of business finance is necessary for the smooth functioning of an organization and this can only be achieved by having a well-defined goal for the finance team.

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