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Finance, the driving force behind businesses

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Whether you are a small or large business owner you probably know that understanding finance is the driving force behind the success of your business.Finance can mean different things to different people.To one person it may refer to their personal finance institution and to another it could refer to their investments, or to a credit or loan purchase.The key to finance is being able to manage them.

Financial Management
Financial management is a critical tool for supporting the goals and objectives of you business.Financial management provides you with the information needed to make or short and long term goals become a reality.It involves controlling and investing the business resources.By understanding how to manage your business finances you can identify ways to use your resources more efficiently and creatively to generate more income.As you learn how to manage your business finances, you will see the success of your business take off.

Budgeting
By creating a budget you can project the costs and revenues for your business.A good budget is a necessary tool in order to manage your finances and build your business.Every successful business tracks where the money is spent, how it is spent, and how much is made.That is just good business finance.Here are some good characteristics of good budgeting.
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  • Your budget should cover a set of activities and be well defined.

  • - A good budget will have an allotted time frame.Generally speaking, budgets cover one fiscal year of business operations and sometimes are divided into quarters or months.This break down makes it feasible to attain your goals.Make sure you take into account inflation, currency and cost fluctuations when you create your budget and other costs that increase annually.

  • - Set realistic projections for expected revenue so you are not searching for more money when the time comes.Sometimes this can be difficult because no one can tell exactly how much a project or program will cost, but try and anticipate all areas in order to keep it realistic.

  • - A good budget will include indirect costs as well as direct ones.An example of an indirect cost would be things such as fringe benefits such as holidays, sick and vacation leaves, pensions, etc.Another example of an indirect cost is general and administrative costs.

  • - Another characteristic of a good budget is when there is collaboration between the programs and financial managers.Without it a budget is doom to failure as each group has different areas of expertise.Collaboration ensures that items in the program budget stay consistent with the charted accounts.

Cutting Costs
Yet another area of finance that can be a driving force of business.Understanding the "know how" behind this concept can bring in substantially more revenue for your business, or make you flat broke.And what business can run if they are flat broke?In understanding business finance you must understand that sometimes there is a need to cut costs; there are a variety of ways to do this.
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  • Cost Sharing is a combination of different activities that use the same resources thus allowing the cost to be shared.

  • - Bulk Purchasing.If at all possible purchase your needed items in bulk.Be selective in what you purchase though; don't purchase items in bulk that you don't use frequently because it costs to store it, and will end up costing you more money in the long run.

  • - Substitute a less expensive item for the regular one and you will find that it significantly reduces the amount you are spending.Just like going to the pharmacy and getting the generic brand prescription saves you money, so will this.

As you begin to discover how to manage and budget your finances you begin to see that finance really is the driving force behind the business.When you finances are not taken care of your business suffers and so do you.

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