There is one simple reason to understand small business financial management and planning in your business - to avoid failure. Eight out of ten new businesses fail primarily because of the lack of good small business finance planning. The guides featured in this section will help you to successfully manage the financial aspects of your business.
This section provides you with various guides that cover the essential components of small business finance planning and management. Used wisely, they will make you familiar enough with the fundamentals to have a fighting chance of success in today's highly competitive business environment.
Financial management affects how and on what terms you will be able to attract the funding required to establish, maintain, and expand your business. Financing management determines the raw materials you can afford to buy, the products you will be able to produce, and whether or not you will be able to market them efficiently.
It affects the human and physical resources you will be able to acquire to operate your business. It will be a major determinant of whether or not you will be able to make your hard work profitable.
Business Financial Management Video
Business financial management in the small firm is characterized, in many different cases, by the need to confront a somewhat different set of problems and opportunities than those confronted by a large corporation. One immediate and obvious difference is that a majority of smaller firms do not normally have the opportunity to publicly sell issues of stocks or bonds in order to raise funds. The owner-manager of a smaller firm must rely primarily on trade credit, bank financing, lease financing, and personal equity to finance the business. One, therefore faces a much more severely restricted set of financing alternatives than those faced by the financial vice president or treasurer of a large corporation.
On the other hand, when small business financial management is concern, many financial problems facing the small firm are very similar to those of larger corporations. For example, the analysis required for a long-term investment decision such as the purchase of heavy machinery or the evaluation of lease-buy alternatives, is essentially the same regardless of the size of the firm. Once the decision is made, the financing alternatives available to the firm may be radically different, but the decision process will be generally similar.
One area of particular concern for the smaller business owner lies in the effective management of working capital. Net working capital is defined as the difference between current assets and current liabilities and is often thought of as the "circulating capital" of the business. Lack of control in this crucial area is a primary cause of business failure in both small and large firms.
The business manager must continually be alert to changes in working capital accounts, the cause of these changes and the implications of these changes for the financial health of the company.
Copyright © by Bizmove. All rights reserved.