Essay assignment defining and revealing the importance of the finance function of a business.
There are many decisions to be made when running a business. Where to operate, how to generate profits, what to market with and many other areas of production are all important issues that have one thing in common: in order to function, they all require some type of financial backing. While immediate decisions regarding specifics to each area of business are designated to separate department heads, the finance function of a business is utilized by and benefits all parties involved in decision making. To understand the finance function of a business, one must understand what the terms ‘finance’ and ‘function’ are defined as separately. Finance is defined as the way businesses and individuals create, allocate and utilize monetary resources (Wikipedia, 2006). Function is defined as an action or use for which something is suited or designed (Encarta, 2006). Together, these terms are the backbone of business operations, and without finance function, a business will eventually become non-existent.
The finance function of a business is absolutely essential for an organization to maintain and allocate funding for all departmental needs. Customarily, department heads submit requisitions for items, ranging from supplies to the hiring of additional employees, and through the finance department, requisitions are either granted or denied. Responsible financial functioning assists businesses in managing, controlling and reporting where monies are distributed. Additionally, proper placement of monies not in use can greatly increase the worth of a company (Finch, 2005). Contrastingly, irresponsible maintaining of funds could lead a business to failure. For example, excessive overtime, unnecessary business trips, bogus bonuses and poor utilization of company supplies can stress a company’s budget. To ensure that monies are being properly utilized, measures such as auditing are put into effect. Reviews of budgets and financial records assist in determining where cuts need to be made, as well as determining if there is room for, say,
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the addition of new employees. Auditing also ensures that there are no corrupt occurrences happening within the company’s finance function. Auditing, or evaluating, a company’s financial records can assist the company in uncovering law-breaking practices, such as embezzlement (Wikipedia, 2006). Thorough and frequent investigating of financial records almost completely eliminates the possibility of shady practices regarding the financial portion of a business.
The model way to practice business is to maintain budgeting. Without financial organization, there would be no way of determining whether or not a business has enough funding for marketing, supplies or even payroll. Furthermore, there would be no way of determining whether or not a company’s efforts to generate business were successful. Managing, controlling and reporting financial activities all fall into the financial function of a business. Properly utilizing this ever-important area in business operations will absolutely assist an organization in staying afloat in the fiercely competitive world of commerce.
Definition of Function. (2006). Microsoft Corporation: Encarta World Dictionary. February 2007. www.encarta.msn.com/dictionary_1861613874/function.html
Definitions of Finance and Audit. (2006). Wikimedia, Inc.: Wikipedia Writing Staff. February 2007. www.en.wikipedia.org
Finance Department: Authority, Mission, Organization and Purpose. (Sept. 2005) City of Lakeland: Finch, G. February 2007. www.lakelandgov.net/finance/main_index.html