What is Business Finance?

Business finance is a broad term which can apply to many different facets of managing money, and assets at a business level. Notice that it involves more than just the handling of funds. Asset handling and control is just as critical in business finance because assets are a form of wealth.                                                        Assets include things such as equipment, real estate, time, merchandise, resources and people. Every business revolves around the use of its assets. Failure to manage assets will destroy the business.

The Customer                                                                                                                                                 Businesses exist to make money. This makes the customer the greatest asset whether the business specializes in sales or services. Every business has very specific policies in place regarding customer service and growth. The very first thing that the successful business must acquire a customer base, then expand the customer base. Every other business function will revolve around maintaining its greatest asset, which is the customer.

Funds                                                                                                                                                                                                           The next greatest business asset is funds available for operation and growth. The successful business has to be able to extract the absolute maximum use of the monies available to finance daily operations, and generate funding for growth, development, and expansion.     

Real Estate                                                                                                                                                                                                   Real Estate is normally the biggest consideration at startup but remains a primary consideration throughout the life of the business. Business owners or trustees must be cognizant of the potential pitfalls and benefits of the land and/or buildings which they occupy. Businesses sometimes err by making decisions according to the wrong criteria. We have all heard the term that location is key, but it is not as important for some types of businesses as with others. Retail businesses need to be placed in the most strategic locations because they will need foot traffic to survive. Their locations will typically be higher priced than those off the beaten path. Inexperienced business owners will often look only at the cost of operating in a certain area and give it too much weight. The first thing to consider with a retail business is the amount of foot traffic that it will receive. Cost is less important. The best retail locations are often the costliest to occupy. Location is less of an issue with service businesses.

Time                                                                                                                                                                                                              We have all heard the statement “Time is money.” Sometimes business owners fail to recognize the significance of outsourcing certain tasks and responsibilities which may be too time consuming, or complicated to perform successfully. Outsourcing can free business managers or owners to handle tasks more critical to day to day operations.   

Merchandise                                                                                                                                                                                               Merchandise kept on hand represents funds which are not benefitting the business. Businesses have to be able to handle the flow of merchandise so that there is never too much cash tied up in merchandise just sitting and not earning money.  On the flip side if there is not enough merchandise on hand customer demands may not be met. Customers won’t wait for your resupply. They will simply move on to another supplier which results in lost opportunity and revenue.

People                                                                                                                                                                                                       People can be a business’s greatest asset or weakest link. Good employees can make a business profitable while those who underperform drain assets. Employees help when they produce steadily, create innovations which save time and money, and take an active interest in the well being of the business. Employees who pilfer, malinger, and destroy or waste resources are a financial liability.