Most people think that finance is the most boring subject on the university degree. However, they are wrong. This article will share why finance is important for you and your businesses.
Finance is the study of how people allocate and manage their financial resources. It is an important subject because it deals with the most important aspect of our lives, money.
15 Benefits of Finance For Business
Before diving into the detail, first, let’s have a look at some business people who are strongly convinced on why finance is important.
“You can’t run your business without good cash flow. Good cash flow management requires financial knowledge.”- Mark Zuckerberg, CEO of Facebook.
“What I learned in school about finance is more precise and has a more immediate impact on my life as a business person than anything I learned about marketing or management.”- Warren Buffett, CEO of Berkshire Hathaway.
Now let’s look at the reasons why finance is important:
1. Finance Is Essential For Any Business To Succeed
With the help of finance, we can forecast and plan everything in business. Without it, we cannot know what will happen in the future and what we should do to avoid unnecessary situations.
“Finance is the language of business.”- Donald Trump, CEO of the Trump Organisation.
2. Finance Provides Information For Decision-Making
Finance helps to know the present and future value of cash inflows and outflows. With the help of this, business people can make better decisions for their company. Finance shows the numerical status of the business.
“I think that finance is a huge lever in driving the business performance. In addition, it gives people a great deal of confidence to know exactly what is going on financially.”- Jack Ma, CEO of Alibaba.
3. Finance Can Maintain And Improve Business Credit Rating
Credit rating is very important for businesses, as it will reflect the creditworthiness of a company to banks or other organizations that offer financial assistance. To lead a successful business, it is essential to have a good credit rating.
4. Finance Assists In Measuring Performance And Efficiency
Through financial ratios (e.g. profit margin, return on assets), businesses can measure how efficient they are at generating profits from the assets they hold. This then allows managers to compare their performance with that of other companies in the same industry.
“I’m a big believer in studying financial statements and understanding a company’s competitive position and where it stands in the world. I also like to know a lot about the industry that company is in.”- Bill Gates, co-founder of Microsoft.
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5. Finance can increase the value of a company
A finance degree is not only essential for individuals, but also businesses. A well-managed and knowledgeable finance team can increase the value of a company.
6. Finance Enables Better Strategic Planning
To be able to make well-informed decisions, good strategic plans are essential and finance is needed to develop these plans. The financial information collected will help identify areas where the company can improve and expand.
7. Finance Can Help Raise Money For Expansions Or Investments
With the right financing options, businesses can easily raise money for expansions or other investments required to keep the business running smoothly.
“Finance is at the heart of every successful business, influencing all decisions made. Finance is the language of business.”- Mark Zuckerberg, CEO of Facebook.
8. Financial System Can Provide Confidence For Investors And Suppliers
Investors and suppliers are more likely to invest in or supply businesses that have a sound financial structure. This then leads to stronger relationships with all stakeholders, creating stability for the company.
“Finance is an extremely important function in our global company.”- Yvon Chouinard, Founder of Patagonia Inc.
“I don’t understand why some small business owners resist turning their finances over to professionals who can bring order out of chaos.” – Donald Trump, CEO of the Trump Organization.
9. Finance Helps Reduce Time Spent On Administrative Tasks
By forecasting and budgeting, businesses can minimize the amount of time spent on administrative tasks which can be reinvested elsewhere. This also enables businesses to be more organized and efficient.
“The key to success in business is financial planning.”- Lee Iacocca, Former CEO of Chrysler.
10. Finance Management Leads To Increased Profits
Through good financial management, businesses can make better decisions regarding pricing, investments, and other areas that will lead to increased profits.
11. Finance Can Prevent Or Lessen The Impact Of Financial Crises
Well-financed businesses are generally less affected by financial crises. This is because they have the cash flow and resources to sustain them during difficult times.
“The role of finance is to provide a buffer between the present and the future.”- Nandan Nilekani, Co-founder of Infosys.
12. Finance Can Help In Risk Management
Through proper risk management, businesses can identify potential risks and take steps to minimize their impact. Risks that are not managed properly can lead to losses for the company.
“Risk management has become one of the most important functions in finance.” – Satyam Computer Services Ltd.
13. Finance Provides Better Control Over Expenses
By closely monitoring expenses, businesses can reduce unnecessary spending and improve control over their budgets.
“I am a big believer in having financial types involved very early.”- Steve Jobs, Co-founder of Apple.
14. Finance Is Needed To Make The Right Investment Decisions
Investment decisions are made based on future returns and potential risks, which is why companies need to know where they stand before making any major investments.
“I don’t think I’ve ever done anything important without deeply understanding the financial implications.”- Michael Dell, Founder & CEO of Dell Computers.
“Finance plays an integral role in business success by providing relevant data that allows managers to make informed business decisions at all levels within an organization.” – Wim Duisenberg, Former President of the European Central Bank.
15. Financial Management Is Essential For Company Growth
Sound financial management is necessary for businesses to grow and expand. It enables companies to make strategic decisions that will help them achieve their goals.
“Finance is the lifeblood of a company.”- Larry Ellison, CEO of Oracle Corporation.
“It’s not about the money. It’s about making the right decisions.” – Carlos Slim Helú, Chairman & CEO of Telmex.
The Importance Of Finance – Conclusion
Now you know why finance is important for businesses. It’s not just about making money, it’s about making the right decisions that will lead to success. Finance is an essential function in any company and should be taken seriously by all business owners.
Finance is one of the most important functions in businesses. It involves financial planning, which helps businesses rather than hurting them.
Good finance management enables companies to make better decisions and good forecasting ensures that they are well-prepared for worst-case scenarios. Much like oxygen to human beings; without it, no business can survive.
With good financial management, businesses can survive and thrive during difficult times, make more informed investment decisions, and increase their profits. So if you’re looking to grow your business, make sure you put finance at the top of your list!
References
- https://smallbusiness.chron.com/importance-business-finance-4109.html
- https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/1746/im_en_2006_03_Zager.pdf
- https://www.kearney.com/financial-services/shareholder-confidence
