Functions of Business Finance
Published October 11, 2011 | 
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.
The Real Purpose of Corporate Finance
Published October 11, 2011 |
Those of us in corporate finance and venture funding can easily forget what we are there for.
We can easily see that it does not matter how the money is raised; there must be a fair exchange for the team, for the technology, and for the money.
The real goal of corporate finance is to see that the company has more than enough money to achieve its goals.
Now that we say it, we know it could not be anything else. What else could it be?
In seeing this, we know immediately what venture funding is not.
Real venture capital does not deprive the company of funds so it can be bought for a song later on, taking the work of the team for little or nothing.
Venture capital is not loading the entrepreneurial team down with straight jacket agreements.
It is not setting a cheap value on the company so you can make a huge gain out of a share of the company that should belong to the people that daily contribute their sweat.
True capital would not keep control of the company to wrest control from those executives who know best how to manage. Capital is not there to know better than management. Management, not capital, is on the firing line and best knows how to achieve the goals of the company.
True corporate finance is seeing that the company has more money than it needs. True venture capital motivates and encourages the team. True venture funding values the team and acts accordingly. True venture capital is part of the team.
True venture capital is more than capital. It is a partnership of equals; it is support that is more than financial; it is part of the team that fights its way forward through the perils and battles that are business.
Only true venture capital is entitled to share in the rewards of the team.
When a company is adequately financed, the entrepreneurs and their team are not deprived of enough pay to support themselves and their families. They are well rewarded for their work by industry standards. They are not paid little or nothing so the investors can live high.
When a company is adequately financed, it has enough reserves to give it confidence to face any contingency.
When a company is adequately financed, it has the money to acquire the resources it needs to win in a competitive marketplace.
Real finance gives these things to the company.
The real goal of any venture capital is to see that the company has more than enough money to achieve its goals.
Business Finance – Shares and Equity
Published October 9, 2011 |
The term equity finance refers to share capital that is invested into a business for the medium to long term in return for a share of the ownership and in many cases an element of control over the running of the business. There are two main forms of equity finance available to businesses. These are business angels and venture capitalists. Equity finance is fast becoming one of the most popular ways of gaining start up finance for businesses.
Equity finance is the perfect example of true risk capital. This is because there is no guarantee that your investor will ever get there money back. Unlike lenders equity finance investors don’t normally have the rights to interest or to be repaid at a particular date. The way in which equity investors regain the money that they have invested into a company is through taking a share of the business and a percentage of the profit. It is because of this high risk involved in equity finance that if your business can not support growth rates of at least 20% you may not be able to attract equity funding. Equity investors are more likely to invest in someone they feel they can trust with a clear business plan and strategy.
As a business you need a clear business plan and strategy regardless of what type of business start up finance you are hoping to attract. You need a comprehensive business plan with a detailed marketing plan and your financial forecast. Your business plan needs to address issues such as how much funding you are going to need and how much control you are hoping to retain over your business. You also need to clearly state what you are using your business start up finance for as well as if your plans are realistic and if your venture is appropriate for outside funding. Whilst you are completing your business plan you also need to consider what potential investors may be concerned about. Without all of this; plus much more no potential investor will go near your business, planning is key if you are hoping to secure external funding.
If you are hoping to gain the financial help of an equity investor there are several questions that you need to keep in mind such as are you prepared to give up some of the shares within your business as well as part of the control over your business? Investors will expect to have some say in the way in which your business is run so you should be prepared for this. You also need to be confident in your business and the products and services that your business has to offer, one way in which you can do this is by identifying what your businesses unique selling point is. As well as this you also need to have the necessary industry skills and experience to drive your business.
For more information about what equity finance can do for your business get in touch with a business angel or venture capitalist today and they will advise you on what to do next.