Finance within Organizations or Companies.
Every day the challenges in all areas of our lives are greater, and financial uncertainty is no exception. Today, the role of finance is becoming more important and relevant.
Finance has been around since the first moment business relationships began. It is a term used for individuals, economic entities and organizations.
This concept of finance is openly coordinated with capitalism, where capitalism consists of assigning the means of production to private property, that is, individuals and companies have the possibility to create, manage, produce resources and generate wealth.
It should be noted that the concept of finance encompasses global levels, where this system has crossed borders and is present in all countries that have trade relations, creating business networks around the world.
The fundamental objectives of finance is to increase the value of the company, by building strategies to meet all the payment and capital commitments that the company has.
Finance has relationships with other disciplines or sciences, such as Accounting, Administration, Economics, Mathematics, Statistics, and Politics, among others. Within the companies or organizations, finances can be developed by departments with specialists who are dedicated to carry out managements that guide in a correct way all the resources to increase them.
The Finances inside the Companies.
Since Finance is openly related to Management, these two disciplines carry out processes of operations, where they manage resources and put to work the profitability of the business, its main objective is focused on creating growth. But at the same time see all existing internal and external risks that may occur and impact the organization's capital. The necessary elements for the functioning of this discipline are in the money it manages, together with the information it handles and analyzes for subsequent decision making.
Citing the book Pérez-Caballo "La Gestión Financiera de la Empresa", he says that all the decisions taken by a company, in any of its areas or levels, are manifested with greater or lesser intensity in monetary terms and have repercussions sooner or later on its financial situation. This is why the financial mentality must and is present in all operational decisions.
In this context, he explains that the main missions of the finance function are:
Support the profitable growth of the company within the framework of its strategy.
To evaluate investments in terms of profitability and risk.
To finance activities and growth by raising the necessary resources.
To prudently manage risk to protect the company's results.
To ensure liquidity and solvency to cover its financial obligations.
Manage the administrative processes of the operations.
To provide reliable and timely economic-financial information for planning, decision-making and control.
Following these parameters, financial management will exist within the companies, where it gathers the necessary experiences and knowledge to always be in economic growth through decision making.
Importance of financial management within companies.
The best tool to evaluate, analyze, and see in perspective the veracity of a business is undoubtedly finance, since it is not enough to manage but to build plans and strategies for companies to be sustainable in the long term, and leave good profits to its shareholders.
Finance as a Management Tool for SMEs".
According to the book Finance as a Management Tool for SMEs, financial management has two components: "a tactical, day-to-day one, and a strategic one, which accompanies all business decisions and which we could define as the ability to reason and view the business from a financial perspective."
In accounting and treasury management, the tactical part is fulfilled, since this is where the costs, payments, income and all the assets that the company has come from, in order to be able to have a balance sheet and have a view of how the company is doing. From here, the idea of setting budgets for other projects and having a more afloat cash flow will start.
When referring to the strategic area, this includes the human component, which is in charge of understanding, analyzing and proposing the best ideas for the business from a financial point of view to remain within the competitive levels in the market.
In this context, the aforementioned book highlights three elements that will help to broaden the financial vision of a business: cash, risk and value.
The aforementioned book emphasizes three elements that broaden the financial vision of a business: cash, risk and value.
Cash or money is the main reason for financial reasoning, and in all types of business we must have a good margin for the company to be profitable and to achieve greater efficiency with better results.
Risk is the uncertainty that the positively expected result will occur.
The value of a business is calculated by the combination of the future cash flow, this predicts whether the risk can meet the forecasts.
Finance is becoming more and more necessary within companies or organizations due to the increase in the market, it is always necessary to be prepared with strategies that favor the company in any situation that may arise, giving value and profitability in the long term.
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