Finance is a vital part of any business, whether big or small. This field deals with the management of funds, which include investments, borrowing, and budgeting. There are several different kinds of finance, including personal finance, corporate finance, and public/government finance. This guide explains the basics of this discipline and explains how it’s used throughout various areas of business.
In the broadest sense, finance is the process of channeling money from savers to economic entities. These intermediaries include banks, credit unions, pension funds, and investment companies. These financial institutions work to ensure that money reaches the right users at the right time. Among these financial intermediaries are investment companies and insurance companies.
Without finance, no business could exist. Finance allows business owners to invest in fixed assets, implement new technology, and expand their business to new markets. Investing decisions, also known as capital budgeting decisions, ensure that an organization has adequate funding. It’s also essential to establish a base in new markets to compete with competitors.
The function of finance has grown over the past century. While it used to be limited to procuring funds, it has now expanded its horizons and become a vital part of every type of business. The management of this function requires sound organization. However, it’s important to note that the organization of this function isn’t standardized, and depends on the size and type of the enterprise. Small businesses typically handle the finance function on their own, while medium-sized enterprises typically have a separate department under the supervision of the Board of Directors. Large organizations generally have a Treasurer and Controller.